Commission holds threat of sanctions above US tax breaks

Date: 27/02/03

THE European Commission said yesterday (26 February) it had drawn up a list of sanctions worth €4.3 billion that could be imposed on the United States if it fails to repeal a system of tax export breaks long lambasted by the EU.

The list of goods, which would be subject to duties of up to 100%, was sent to member states for consideration.

The World Trade Organization (WTO) last August granted the EU the right to impose counter-measures on the US in the form of tariffs, after ruling against US export tax breaks granted under a scheme called the Foreign Sales Corporation (FSC).

But Arancha Gonzalez, spokeswoman for Trade Commissioner Pascal Lamy, emphasised there was no deadline for a decision.

"This does not mean at this stage that we are imposing any sanctions on the United States," she said. "We remain convinced that the most important thing is to ensure the United States changes the legislation, that it complies with the WTO decision."

Lamy will meet with congressmen during a two-day trip to Washington (3 and 4 March) to hear their plans for repealing the tax provisions.

The Commission presented an initial list last September of a wider range of goods, ranging from nuclear reactor parts to chewing gum to television sets.

After listening to more than 400 reactions from companies and member states, it whittled down the list to its current form. It includes goods selected from the 46 chapters of the Common Customs Tariff already notified to the WTO in November 2000.

The European Commission said on 26 February 2003 it had drawn up a list of sanctions worth €4.3 billion that could be imposed on the United States if it fails to repeal a system of tax export breaks long criticised by the EU.