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International Trade
Newsletter - October 8, 2002
 
In this Issue...
U.S.-Europe Trade War Possible over Foreign Sales Corporation Dispute
 
 October 8, 2002
 

A World Trade Organization (WTO) arbitration panel has decided that the European Union (EU) can levy up to $4 billion in sanctions against U.S. products because the current U.S. Foreign Sales Corporation (FSC) law amounts to an illegal export subsidy. A WTO Appellate Body decision earlier this year had rejected a revised U.S. law that attempted to remedy the problem and referred the matter to the arbitration panel to determine the exact amount of possible countermeasures allowed the EU. The Europeans developed a list of $10 billion to $15 billion in products to be targeted, and now are narrowing the list based on input from affected industries. The EU spokesman declined to offer a deadline for U.S. compliance with the ruling, but expressed the hope that they would see progress toward implementation. However, the congressional action needed to bring the United States into compliance with the WTO ruling and to avert a trade war with Europe may not be forthcoming this year. House Ways and Means Chairman Thomas was noncommittal when asked about the prospects for getting legislation passed to remedy the situation. Representative Thomas already has introduced his own bill dealing with the issue.

A larger obstacle is the range of foreign and domestic issues confronting the Bush Administration, making it unable to provide the leadership that may be needed to get this issue pushed through Congress this session. The Senate is only now talking about setting up a “working group” to examine the issue. Some members have expressed the view that a mutual desire to avoid a trade war will act as a brake on the situation even if Congress is unable to act this year. On the other hand, some lawmakers may be inclined to use the situation to express their resentment toward the WTO’s ruling. Asked whether the Senate would have time to deal with the issue, Senate Majority Whip Reid replied that he would rather work on getting rid of the WTO, although he expressed little hope of that happening.

For more information, contact Andrea Ewart or Ron Oleynik, toll free at 888-688-8500, or via e-mail at aewart@hklaw.com and roleynik@hklaw.com, respectively.