CongressDaily
House Ways and Means Chairman Archer said Wednesday he expects there will have to be a legislative remedy to the recent World Trade Organization ruling against the United States with regard to foreign sales corporations--but that for now he is deferring to U.S. negotiators in crafting a compromise. "We will probably have to take some sort of significant legislative action," Archer said, signaling that the United States must abide by the ruling. He would not say what a legislative fix would look like. but acknowledged it would be substantial--because the value of the subsidy to U.S. companies could be roughly $50 billion during the next 10 years. Late last month the WTO, in a decision favorable to the European Union, ruled that FSCs amounted to an illegal export subsidy for U.S. companies. U.S. officials and bipartisan congressional leaders expressed regret over the decision, arguing that there had been a long-term understanding with Europe that FSCs would be grandfathered into the WTO rules. Treasury Secretary Summers and others expressed hope for working out a settlement. Congressional trade aides indicated that such a settlement could involve retaining the subsidy and making concessions sought by Europe. More likely, there will be a combination of trade concessions and limitations on FSCs. Of course, repealing FSCs could emerge as the only solution: One aide said there are almost unlimited possibilities for what that deal could look like. Senate Majority Leader Lott and U.S. officials have grumbled publicly and privately that the WTO ruling had more to do with politics than economics. The Europeans lost in disputes over bananas and beef in the last two years and were rebuked by the United States for ignoring the rulings even after sanctions were imposed. The FSC case is different. First, with a $50 billion price tag for the subsidy, Archer acknowledged that it would not be in the U.S. interest to risk proportionate sanctions and launch a huge trade war. "It is almost unthinkable the world would be put through that," Archer said. Second, Congress will consider in the coming months legislation needed for China's accession into the WTO and legislation on whether to continue U.S. membership in the WTO. Congressional trade advocates agree that the United States must respect the rules-based trade system and avoid drawing more negative focus to the WTO itself. "The confluence of these three things is really bad," said one aide. A Senate aide said this week that Senate Finance Chairman Roth also is deferring to U.S. negotiators and hopes that Congress and the administration will work together on resolving the matter. Archer predicted that the delicate talks could take some time and that Congress likely will not act until "we get close to the edge of the cliff as is often the case." If the talks break down, Archer said a bipartisan solution in Congress would be more of a challenge. -- By Stephen Norton:
