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WTO Rules Against U.S., EU Satisfied
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World Trade Organization Director-General Mike Moore
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GENEVA, August 30 (IslamOnline & News Agencies) - Independent arbitrators Friday, August 30, 2002, authorized the European Union to consider a record four billion dollars (4.1 billion euros) in sanctions against the United States in the dispute over U.S. export tax breaks, the World Trade Organization announced.
In their ruling, the WTO arbitrators said 4.043 billion dollars would be "appropriate counter measures", reported Agence France-Presse (AFP).
Diplomats said the amount of potential sanctions, in line with the EU's expectations, was unprecedented.
The ruling triggered an unusual statement from WTO Director-General Mike Moore, who urged the U.S. and EU to resolve the dispute in "an amicable and constructive fashion".
"The European Union and the United States are among the most important members of the organization and both hold a special responsibility to ensure the continued health and soundness of the WTO and the global trading system," he added.
The WTO rarely comments on rulings on disputes.
The United States, for its part, said it was disappointed by the WTO ruling.
"I am disappointed that the arbitrator did not accept the lower figure put forward by the United States," U.S. Trade Representative Robert Zoellick said in a statement.
"We believe that one billion dollars is much more accurate."
Under WTO rules, the EU must first present a request to the WTO's disputes settlements body for final approval to impose the sanctions, unprecedented in their size.
As expected, the European Commission welcomed the WTO ruling against the United States in the dispute over U.S. export tax breaks.
"We are satisfied by today's (Friday's) decision that makes the cost of non-compliance with WTO crystal clear," EU trade commissioner Pascal Lamy said.
"The arbitrators have endorsed the EU's request, i.e., they have given us an amount of potential counter measures which will create a major incentive for the U.S. to eliminate this huge illegal export subsidy," Lamy said in a statement.
Under WTO rules, the EU would now present a request to the WTO's Disputes Settlements Body before getting a green light to apply the measures. But that is largely a formality, and means the EU could soon impose a tax of up to 100 percent on any U.S. import.
In February, in a final appeal ruling against the U.S., the WTO confirmed the tax breaks are illegal because they provide a direct export subsidy.
The system allows U.S. companies carrying out business through subsidiaries in offshore tax havens to benefit from reduced export taxes.
A trade source was quoted by AFP as saying, "It's now up to the EU how and when they act".
There are an estimated 4,000-5,000 FSCs, mostly based in tax havens, used by U.S. multinationals.
About half of annual U.S. exports of 250 billion dollars (252 billion euros) benefit from the regime, according to diplomats.
The ruling by the independent arbitrators, delayed for several months, opens the way for the EU to consider retaliatory measures on U.S. imports until Washington changes its legislation.
"The United States has breached the rules, the WTO is providing a reminder of the fact, that's normal procedure," one diplomat told AFP.
U.S. President George W. Bush said in May that he would try to work with the U.S. Congress to comply with the WTO ruling against FSCs.
"There is evidently an inability in the U.S. to control protectionist forces," a diplomat said, adding that Washington had not hesitated to defy international rules if they went against U.S. interests.
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