Zoellick warns against ‘nuclear’ EU sanctions against US tax breaks

Date: 17/05/01

By Craig Winneker

US TRADE Representative Robert Zoellick has warned against a "nuclear" reaction from the EU if it chooses to escalate a multibillion-euro dispute over export tax breaks.

The World Trade Organisation is set to release its findings on Monday regarding the Union's complaint against the Foreign Sales Corporation (FSC) scheme, which gives some €4 billion per year in tax breaks to US multinationals.

"It is expected to come on Monday," said one diplomatic source of the preliminary WTO report, "although that is not a legal deadline and there could be some delay."

The WTO has previously upheld EU complaints that the FSC constitutes an illegal export subsidy. The US modified the law last year, but Brussels maintains that it still violates world trade rules and has threatened sanctions if the Geneva-based body rules against it.

Zoellick, in Strasbourg to speak to the European Parliament, said such a move would be like "using a nuclear weapon on the trading system".

After the WTO issues its findings, the two sides will have three weeks to comment before a final ruling is issued.

US Trade Representative, Robert Zoellick, has warned against a 'nuclear' reaction from the EU if it chooses to escalate a multibillion-euro dispute over export tax breaks.