WTO Grants EU 4 Billion Dollars Sanction against US

World Trade Organization (WTO) Director-General Mike Moore on Friday urged United States and the European Union (EU) to continue to work in a constructive manner to solve their dispute over US corporate tax law.

WTO on Friday ruled that the EU can impose trade sanctions of arecord 4.043 billion US dollars against the US in a long-running and difficult dispute over U.S. Foreign Sales Corporation (FSC) tax law.

The figure was set by a special panel of trade arbitrators who had been debating since January how much the EU was being hurt by a tax system that the WTO has repeatedly ruled to be in breach of international trade rules.

"We find that the amount of 4.043 billion dollars ... can be considered to be a reasonable approximation of the actual value ofthe subsidy," the panel said.

Moore, who leaves office this week, said in a statement that "The European Union and the United States are among the most important members of this organization and both hold a special responsibility to ensure the continued health and soundness of WTOand global trading system."

Trade officials said that the sanctions are the highest level of retaliation levied in any previous WTO dispute since WTO was established in January 1995. Experts say their potential effect onEU-US trade would be so serious that the ruling will likely prompta new compromise between the two sides.

EU Trade Commissioner Pascal Lamy said in a statement that "We are satisfied by today's decision that makes the cost of non-compliance with WTO crystal clear."

"The arbitrators have endorsed the EU's request, i.e. they havegiven us an amount of potential countermeasures which will create a major incentive for the U.S. to eliminate this huge illegal export subsidy," he said.

But the proposals are opposed by Boeing and other beneficiariesof the tax breaks, which say that they do not go far enough.

The aeronautics company has warned that nearly 10,000 jobs could be lost unless a comparable system is devised, a powerful argument with congressional elections looming.

The US has imposed WTO-approved trade sanctions on the EU in the past, including in disputes over banana imports and hormone-treated beef, but the sums of money involved were much smaller.

Trade officials have expressed concern that rows between the world's two most powerful economies could hamper attempts by the WTO's 144 member states to negotiate a new round of trade liberalization, which many economists see as vital to revive a sagging world economy.



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