News Release
No. 139/04
October 12, 2004
FSC: COMMISSION TO STUDY NEWS US TAX LEGISLATION AIMED AT
REMOVING WTO ILLEGAL EXPORT SUBSIDIES FROM 2007
On 11 October 2004, nearly four years after the expiry of the deadline established
by the WTO, the US Congress has adopted a Bill repealing the FSC/ETI legislation.
The WTO has repeatedly condemned the FSC/ ETI which provides WTO-illegal subsidies
to US exporters to the tune of $US 4 billion per year. The Bill, however, provides
that FSC/ETI benefits will still be available to US exporters up to the end of
2006. Following its adoption by Congress, the Bill will enter into force once
the US President has signed it.
EU Trade Commissioner Lamy said: “I am pleased that Congress has finally taken
this step towards US compliance with the WTO ruling. It vindicates the EU’s patient
but firm approach. Our objective throughout has been to obtain the withdrawal
of these illegal subsidies by introducing progressively rising countermeasures.
We will now carefully study the details in the final compromise between both chambers,
in particular regarding transition periods, grandfathering clauses, as well as
all other relevant fiscal provisions.”
Background
In subsequent rulings by a Panel and the Appellate Body, the WTO found the FSC
to constitute an illegal export subsidy under both the Subsidies Agreement and
(in relation to agricultural products) the Agriculture Agreement. The US was then
given until 1 November 2000 to withdraw the FSC scheme.
On 15 November 2000, President Clinton signed the ETI Act, which meant to replace
the FSC. The ETI Act, however, did not modify the substance of the export subsidy
scheme and as a result the EU challenged it before the WTO. In January 2002, the
WTO confirmed that the ETI Act also constituted a prohibited export subsidy and
that the US had not, therefore, complied with its previous ruling.
Consequently, on 7 May 2003 the WTO endorsed the EU request for countermeasures
for a level roughly equal to the estimated annual US subsidy (i.e. US$ 4 billion).
The EU had, 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 Council Regulation imposing countermeasures was published on 17 December 2003
in OJ L 328 p.3. With the clear objective of obtaining withdrawal of the US measures,
it provides for a gradual imposition of countermeasures as from 1 March 2004 at
the level of 5%, followed by automatic, monthly increases of 1% up to a ceiling
of 17% to be reached in March 2005. The targeted products cover a wide variety
of sectors (e.g. steel, textiles, paper) with the exception of the civil aircraft
sector.
The exact description of the products can be found at:
http://europa.eu.int/eur-lex
(OJ L290 of 28 October 2002).
Among the major beneficiaries of the FSC are: Boeing, Caterpillar, General Electric,
Microsoft, Intel, Motorola. As a way of an example, Boeing, the major beneficiary,
has received an average of $US 178 in the period 2001-2003 while total benefit
from 1992 through 2003 amounts to over $US 1,6 billion.
It is clear that the FSC system grants a considerable competitive advantage to
U.S. manufacturers, to the detriment of their EU competitors, as the WTO has repeatedly
ruled.
For further information see: IP/04/636, IP/04/769, IP/01/1214, MEMO/04/40
DG TRADE website:
http://europa.eu.int/comm/trade/miti/dispute/wn.htm
http://mkaccdb.eu.int/miti/dsu
Press Contacts: |
Anthony Gooch
202-862-9523
|
Maeve O'Beirne
202-862-9549
|
