Associated Press | November 24, 2003
A senior U.S. official said on Monday he expects a long-running trade dispute over tax breaks for U.S. exporters to be resolved in the first quarter of next year.
"We have to move the (tax) legislation through Congress," U.S. Commerce Undersecretary Grant Aldonas told reporters. "Congress is set to move on this in the first quarter of next year."
The dispute centers on a set of tax breaks for U.S. exporters that the World Trade Organization has said violate international trade rules.
The European Union has warned it would start imposing sanctions by the start of next year on U.S. exports unless Congress repeals the tax breaks, known as the Foreign Sales Corporation.
The EU plans to phase in the tariffs -- starting at US$334 million in sanctions next year instead of the potential US$4 billion -- if Washington fails to remove the contested tax break.
Aldonas said he was optimistic Congress would make the necessary changes in U.S. tax code to avoid sanctions because the legislation has already passed two trade committees. The strategy is to build political will in Congress by tackling the WTO dispute and tax problems felt by U.S. manufactures in the same tax package, Aldonas said.
Aldonas said President Bush understands that the U.S. must comply with the WTO ruling.
"At the end of the day, you have to comply," Aldonas said and added the Bush administration welcomed the E.U. pressure.
"I appreciate the forbearance of the EU," Aldonas said. "As long as we push compliance and the EU is supportive, that's one of the main drivers" for Congress to pass the legislation.
On the separate steel trade row, Aldonas denied reports that Washington was negotiating a compromise with the EU to avoid billions of dollars in European sanctions in a dispute over steel tariffs.
"I don't know of any negotiations going on right now," Aldonas said.
The WTO is expected to declare the tariffs illegal Dec.1, paving the way for the EU to impose sanctions on US$2.2 billion worth of U.S. imports, effectively pricing goods - from orange juice to pajamas - out of the European market.
U.S. President George W. Bush said he imposed the tariffs in March 2002 to give the ailing U.S. steel industry breathing space to modernize and consolidate. They are scheduled to remain in place until March 2005.
Aldonas said much restructuring has taken place, but said "it's not done."
The EU, Norway, Japan, Korea, China, Switzerland, New Zealand and Brazil challenged the legality of the tariffs under world trade rules and won.
Trade experts have said it was unlikely the tax break dispute would spiral out of control. The two sides are working closely to avoid massive trade sanctions -- described by U.S. Trade Representative Robert Zoellick as the trade version of a nuclear bomb.
The EU has repeatedly put off imposing trade sanctions. The WTO ruled the tax law illegal in 2001 and earlier this year authorized the EU to impose trade sanctions on up to US$4 billion of U.S. exports.Associated Press:
