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The New
York Times
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November 18, 2000, Saturday, Late Edition -
Final
SECTION: Section C; Page 1; Column 2;
Business/Financial Desk
LENGTH: 817 words
HEADLINE: INTERNATIONAL BUSINESS;
Europeans Seek $4
Billion in Trade Sanctions Against U.S.
BYLINE:
By PAUL MELLER
DATELINE: BRUSSELS, Nov. 17
BODY:
The European Union asked the World Trade
Organization today to approve more than $4 billion in trade sanctions on
American products to retaliate for what it says is an illegal tax break granted
to exporters in the United States.
The request for punitive tariffs, the
largest ever sought from the trade organization, came one day after President
Clinton signed a law replacing the tax arrangement at issue with another,
delaying until at least June the time when sanctions could become effective. In
its request, the Europeans submitted a list of 99 product groups including
soaps, paper products, confections, aircraft and sports accessories that would
affect some of the nation's biggest exporters, like Procter & Gamble, Mars,
Boeing and Nike.
The United States trade representative, Charlene
Barshefsky, and the deputy Treasury secretary, Stuart E. Eizenstat, said in a
joint statement that the United States would "contest the level of damages
alleged by the E.U."
The W.T.O. has already ruled against the United
States in the trade dispute, agreeing with Europe's contention that a tax
program favoring United States exporters, known as the Foreign Sales
Corporation, provided illegal subsidies.
Anthony Gooch, a spokesman for
the European Union, said $4 billion "is a reasonable estimation of the damages
the E.U. has incurred as a result of the U.S. Foreign Sales Corporation
program."
"The figure of just over $4 billion the E.U. is claiming in
damages makes other trade disputes between the E.U. and U.S. pale into
insignificance," he said.
The Foreign Sales Corporation, which was
established in 1984, allows United States corporations to avoid taxes on
revenues generated from exports if they are booked through a foreign subsidiary.
The program has reduced United States companies' export tax bills by as
much as 30 percent a year, giving them a competitive advantage over their
European competitors not just in markets in Europe, but globally, Mr. Gooch
said.
"This case is of major importance for European companies as the
sectors that benefit the most" from the arrangement are ones in which United
States and European companies "fiercely compete," he said. The sectors include
chemicals, pharmaceuticals, machinery, electrical equipment and transportation
equipment, according to the European Commission, the European Union's executive
arm.
The product groups on the list are ones where European dependence
on products from the United States is low and where the sanctions would not
affect consumers and industry in Europe, Mr. Gooch said.
Agricultural
products including cereals, meat and dairy products are included, as are more
specialized products like fur skins, nuclear reactors and imitation jewelry. The
United States exports $160 billion worth of products to Europe annually.
The law President Clinton signed on Thursday actually offers more tax
relief -- up to $6 billion annually -- to companies that export goods or
manufacture them abroad. But companies would not need to channel sales through
offshore subsidiaries, which are often situated in tax havens; they would get
the tax breaks directly.
The Clinton administration says the W.T.O. will
soon decide in its favor, ending the matter. The European Union maintains that
the new law is merely an expansion of the old one and has said that it still
plans to impose sanctions pending a fresh victory at the trade organization.
"The E.U. believes that the new law not only maintains the violations
found by the W.T.O. in the F.S.C. case but may even aggravate them," the
European Commission said.
Ms. Barshefsky and Mr. Eizenstat said: "We
regret that the E.U. has not accepted our new legislation. We continue to
strongly believe that it is W.T.O.-compliant."
The European Union has
asked the trade group to examine the new export tax legislation. "Although we
believe the F.S.C. replacement legislation does not solve the problem," the
Europeans will leave it to the trade group to rule on the matter, said Pascal
Lamy, the European Union's trade commissioner.
No sanctions would be
imposed until the W.T.O. has ruled on the new legislation, according to the
statement from Ms. Barshefsky and Mr. Eizenstat. The trade group is not expected
to rule on the new legislation before early next summer.
Asked why
Europe is seeking W.T.O. authority for its sanctions and not pushing ahead with
them immediately, as the United States did early last year in its retaliatory
move against European banana import rules, Mr. Gooch said: "Two wrongs don't
make a right. We want to de-escalate this dispute, so we are following all the
proper measures."
In the banana dispute, the United States imposed 100
percent tariffs on selected European imports -- a trade sanction worth $300
million a year -- in response to what it says are unfair import restrictions on
bananas and hormone-treated beef.
http://www.nytimes.com
GRAPHIC: Photo: Romano Prodi, right, president of the
European Commission, talked with, from left, Martin Kohlhaussen of Commerzbank,
Rolf E. Breuer of Deutsche Bank and Bernd Fahrholz of Dresdner Bank at the
European Banking Congress in Frankfurt yesterday. (Reuters)(pg. C2)
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