WTO may 'back' EU in trade dispute

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Friday, 22 June, 2001, 21:06 GMT 22:06 UK

WTO may 'back' EU in trade dispute

The World Trade Organisation is thought to have decided to back the European Union in a trade dispute with the US, according to media reports. The WTO has reportedly decided to support an EU complaint about a US export tax scheme that effectively subsidises major exporters, such as Boeing and Microsoft.

The EU estimates that US exporters receive as much as $4bn in illegal subsidies under US tax laws.

It has appealed to the WTO, arguing that the system breaches WTO rules because it treats sales to foreign buyers more favourably than sales to domestic buyers.

The current tax system is a revised version of a previous tax regime, which also irked the EU.

No comment

The Trade Representative's office has declined to comment on the rumours that the WTO has ruled against the US.

"The United States will respect the confidential nature of the report and will not comment on its findings, nor its implications, at this time," the office said.

President Bush's administration may retaliate by attacking the EU tax systems The EU commission added that it was premature to comment at this stage.

If reports are accurate and the EU wins the WTO case, it could decide to impose $4bn of sanctions on US goods.

However, such a move risks escalating a trade war between the two parties, which could in turn prompt President George W. Bush's administration to complain about EU tax systems.

The issue will certainly challenge US Trade Representative Robert Zoellick and EU Trade Commissioner Pascal Lamy, who have worked hard in recent months to improve trading relations.

It also comes at a tense time as the US waits for the EU's pending decision to block the merger between General Electric and Honeywell.

http://news.bbc.co.uk/hi/english/business/newsid_1403000/1403454.stm

-- Martin Thompson (mthom1927@aol.com), June 23, 2001


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