Legislation enacted to appease European concerns falls foul of world body
A US law enacted last year to placate European Union (EU) concerns over tax relief on foreign exports continues to illegally subsidise companies like Boeing, the World Trade Organisation (WTO) has ruled.
In its decision, the WTO says the USA “grandfathered” tax relief provided by the Foreign Sales Corporation (FSC) law and its successor, the Extraterritorial Income Exclusion (ETI) Act, when it passed the American Jobs Creation Act (AJCA) in 2004. The AJCA was supposed to end all subsidies, and stop a trade war that has already seen the EU temporarily impose punitive duties on US goods.
The WTO concluded the USA “maintains the prohibited FSC and ETI subsidies through the transition and grandfathering measures at issue”. The US Trade Representative has said it will appeal against the decision, which allows the EU to resume its punitive import duties.
European trade commissioner Peter Mandelson said: “The EU welcomes the WTO’s clear language and conclusions. It has been confirmed that the USA has yet to comply with previous WTO rulings.”
When it repealed the FSC/ETI, previously ruled illegal by the WTO, “US Congress chose to perpetuate the prohibited tax subsidies through a transition period and the permanent ‘grandfathering’ of existing contracts”, Mandelson said, adding: “These provisions, which are now contained in the American Jobs Creation Act, are unacceptable in view of the large benefits involved. We estimate these advantages…add up to over €750 million [$900 million] for Boeing alone.”
DARREN SHANNON/WASHINGTON DC
Source: Flight International
