News Release
Pascal Lamy
No. 34/03
March 1, 2004
FSC: EU STARTS COUNTERMEASURES ON US PRODUCTS
European Union countermeasures took effect today on a list of United States
products in the long-standing dispute with the US at the World Trade Organization
over
Foreign Sales Corporations (FSCs).
Countermeasures on the selected products consist of an additional customs
duty of 5% to be enforced from today, followed by automatic monthly increases
of 1% up to a ceiling of 17% to be reached on 1 March 2005, if compliance has
not happened in the meantime.
EU Trade Commissioner
Pascal Lamy
said:
"Despite waiting for more than two years, the US has not brought
its legislation in line with WTO rules. We are therefore left with no choice but
to impose countermeasures. The name of the game is not retaliation but compliance:
countermeasures will be lifted the day the FSC is repealed. We now need to turn
our attention to the post-March 1 period. In my recent trip to Washington, I have
discussed this issue with the US administration and congressional leaders and
I am encouraged that progress can be rapidly achieved to adopt legislation repealing
the FSC."
With the clear objective of obtaining withdrawal of the US measures,
Council Regulation 2193/2003 (OJ L 328, p.3) provides for a gradual imposition
of countermeasures as from 1 March 2004. It also includes a detailed list of products
on which countermeasures will be applied, which was prepared following extensive
consultations with EU economic operators and Member States. The countermeasures
are well below the US $4 billion level authorized by the WTO last year.
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 Extra Territorial Income
Act (ETI), 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.
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.
For further information please visit the European Commission’s 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:
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Anthony Gooch
202-862-9523
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Maeve O'Beirne
202-862-9549
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