News Release
Pascal Lamy
No.
34/03
May 7, 2003
FOREIGN SALES CORPORATIONS:
FOLLOWING WTO AUTHORIZATION TO APPLY COUNTERMEASURES OF UP TO $4 BILLION, EU EXPECTS
US TO ENSURE COMPLIANCE WITH WTO RULES BEFORE THE BEGINNING OF NEXT YEAR
Today,
the WTO Dispute Settlement Body authorized the EU to increase customs duties up
to the level of 100%, for a total of $4 billion of US Trade. This move clears
the way for the EU to impose counter-measures to be applied on a detailed list
of products notified to the DSB. EU
Trade Commissioner
Pascal Lamy said: "I am encouraged by the determination of
the US
Administration and Congressional leaders to ensure repeal of FSC/ETI during the
course of the current fiscal year. I also trust that any solution found by the
US will be fully compatible with WTO rules. The Commission will review the situation
in the autumn, and if there is no sign that compliance is on the way at that time,
it would then start the legislative procedure for the adoption of countermeasures
by 1 January 2004."
The
EU request for authorization to apply countermeasures included a detailed list
of products on which countermeasures may be applied. This list was prepared following
extensive consultations with EU economic operators and member states, which started
last September.
Under WTO rules, the US had an obligation to ensure compliance by November
2000. Furthermore, the EU has been entitled to retaliate since August 2002, date
when the WTO arbitrator fixed the amount of countermeasures to which the EU is
entitled. The EU has, however, avoided any immediate recourse to retaliation so
as to give a reasonable time for the US Administration and Congress to adopt the
necessary legislation for the repeal of FSC(ETI). The authorization granted by
the WTO today allows the EU to preserve its rights to impose countermeasures if
FSC/ETI is not repealed by the end of this fiscal year.
Background
The
history of this case goes back to 1971 to the Domestic International
Sales Corporation (DISC) scheme, which was declared an illegal export subsidy
by a GATT panel in 1976 (the panel ruling was adopted in 1981). The US
replaced the DISC scheme with the Foreign Sales Corporation (FSC) scheme in 1984.
At the time the EU contested the legality of the FSC but did not pursue it due
to the opening of the Uruguay Round trade negotiations.
Following further complaints by EU companies, and in view of the increasing amount
of FSC subsidies being granted by the US, the EU resumed bilateral contacts with
the US
in 1997. Since no progress was made, the EU requested a WTO panel to pronounce
itself on the dispute. The Panel in its report of October 1999, found the FSC
to constitute an illegal export subsidy under both the Subsidies Agreement and
(in relation to agricultural products) the Agriculture Agreement.
The
US appealed against the Panel Ruling but the Appellate Body confirmed the panel
findings on the illegality of the FSC scheme. The US
was then given until 1 October 2000 (extended to 1 November 2000) to withdraw
the FSC scheme.
In
an effort to comply, on 15 November 2000, President Clinton signed the FSC Replacement
Act (ETI Act) into law. The ETI Act, however, did not modify the substance of
the export subsidy scheme and as a result on 17 November 2000, the EU launched
a further Panel on compliance and at the same time presented a request for countermeasures
for an amount of US $4,043 million. While the compliance panel was established
in December 2000, it was agreed that, during the compliance procedure, the arbitration
procedure on the amount of countermeasures would be suspended and that it would
be automatically reactivated upon adoption by the WTO of the Appellate Body's
findings.
On
20 August 2001, the WTO compliance panel examining the ETI Act issued its report
in full support of the EU. In particular, the panel found that the ETI Act also
constituted a prohibited export subsidy under WTO rules. The US appealed but in
January 2002 the WTO Appellate Body once more confirmed the panel findings.
Consequently, on 28 January 2002
the panel and Appellate Body reports were adopted and the arbitration procedure
was reactivated. The report of the arbitrators was issued at the end of August
2002 and endorses the EU request for countermeasures for a level of US $4,043
million. The DSB has now authorized the EU to apply countermeasures up to that
level.
The
list of products can be found at:
http://mkaccdb.eu.int/dsu/doc/ds108-26.doc
The
exact description of the products can be found at:
http://europa.eu.int/eur-lex/en/archive/2002/l_29020021028en.html
(OJ L290 of 28 October 2002)
For
further information see:
IP/01/1214, IP/00/1321,
MEMO/00/84, IP/00/1094 and IP/00/186
DG TRADE websites:
http://europa.eu.int/comm/trade/miti/dispute/wn.htm
http://mkaccdb.eu.int/miti/dsu
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Press Contacts:
|
Willy Hélin
202-862-9530
|
Wilfried Schneider
202-862-9523
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