By Lewis Crofts - 11th May 2004
Washington has inched closer to ending a bitter trade spat with Brussels by pushing through legislation to repeal illegal tax breaks.
Europe slapped punitive sanctions on the US last March for running so-called Foreign Sales Corporations (FSCs) – tax kick-backs to aid American exporters.
But the cogs of the US legal system have finally creaked into action, possibly bringing an end to the dispute which has sullied the US-EU trade waters.
EU trade commissioner Pascal Lamy welcomed the move, hoping "the time has come to put this long dispute beind us once and for all."
Brussels has been cranking €290 million tariffs up month by month on 1,000 US products turning the screw on US lawmakers and forcing them to bring corporate tax laws into line with a World Trade Organisation ruling.
Only the Senate has passed the law, however, and the lower House of Representatives must now scrap over it, potentially demanding awkward amendments and prolonging the process.
A US trade spokesman heralded the vote as “very good news”, but added that “we are only part of the way to where we need to be.”
“Attention will now focus on the House of Representatives, but nobody has a lot of certainty about how quick this process will be moving.”
There will need to be a “conference committee” so that the changes demanded by both sides can be reconciled and a final text can be agreed upon.
Many are pushing for this to be done by the end of the month, but a US official said this was “a bit optimistic”, hoping rather that the package will be stitched up “before the summer break”.
This would mean the US is potentially facing at least another month of retaliation in which Europe will add an extra one per cent to the existing sanctions, active as of June 1.
The official added that “both bills will phase out the FSC over a period of three years”.
Such a phase-out period had previously been unacceptable to the EU which had already held fire over the sanctions for longer than it had to.
But Brussels has recently showed more flexibility, reacting to demands by EU firms to tread carefully for fear of widespread retaliation from US businesses.
An EU spokesman would not be drawn on the content of the current document, prefering to reserve judgement for the final text.
"Until then the sanctions will continue to apply."
There was a general sense of relief in the EU camp that Washington is finally pushing through the necessary changes.
"We're sending a letter of congratulations to the sentaors [in question]," added a Brussels official.
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