EU Moves to Drop US Trade Sanctions After Tax Law Repealed

The European Commission on Monday proposed lifting trade sanctions against the United States after Washington scrapped tax provisions that global trade arbitrators had declared illegal. US President George W. Bush signed the repeal of the Foreign Sales Corporation (FSC) rules on the previous Friday, ending a six-year dispute over export tax breaks benefiting companies such as Boeing, Microsoft and IBM.

EU Trade Commissioner Pascal Lamy welcomed the development but cautioned that Brussels would verify the new legislation's compatibility with World Trade Organisation rules, particularly a clause preserving some FSC benefits through 2006 and potentially beyond.

The WTO had ruled in January 2003 that the original FSC provisions gave American exporters an unfair advantage, and subsequently authorized Europe to impose more than four billion dollars in retaliatory duties. EU sanctions had been in effect since 1 March 2004.

The replacement legislation cuts the top corporate tax rate for domestic manufacturers by three percentage points, to 32 percent, and extends certain breaks to construction, engineering, and oil and gas firms. The wide-ranging bill also includes roughly 140 billion dollars in assorted tax provisions and ends a Depression-era tobacco subsidy, compensating growers with 10.1 billion dollars.

Historical summary. TurkishPress restated this AFP wire report, first published in October 2004, in its own words.