WTO ruling on EU-US tax break row expected Monday
GENEVA, May 15 (Reuters) - A panel set up by the World Trade
Organisation (WTO) to resolve a multi-billion dollar row between
Washington and the European Union over U.S. export tax breaks should
issue its findings on May 21, diplomatic sources said on Tuesday.
"It is expected to come on Monday, although that is not a legal
deadline and there could be some delay," one diplomatic source said.
The three-man panel is expected to send to Brussels and Washington its
preliminary report on the dispute over U.S. tax relief to companies
with offshore branches -- so called Foreign Sales Corporations (FSCs).
The WTO ruled last year that the FSC programme, which grants some $4
billion a year in tax breaks to major U.S. exporters, was an illegal
subsidy.
Following the interim report, the two sides will have some three weeks
to comment before the dispute settlement panel makes a final ruling in
the long-running spat that threatens to erupt into an all-out trade
war.
Brussels accuses Washington of not abiding by earlier WTO rulings that
the FSC system -- which includes corporate giants such as plane-maker
Boeing [BA] and Microsoft [MSFT] -- violates global trade accords.
It has warned that it is ready to ask the world trade watchdog for
permission to impose sanctions totalling some $4 billion a year -- by
far the highest amount ever sought -- if Washington loses again but
fails to abide by the ruling.
However, U.S. Trade Representative Robert Zoellick, on a trip to
Europe, warned the EU on Monday that such a move would be like
dropping a nuclear bomb on the world trading system.
Zoellick, who was speaking to the European Parliament's industry
committee, said that such sanctions could send the row spinning out of
control.
"There's is no doubt that if it starts to go into affecting that much
trade, it is like using a nuclear weapon on the trading system,"
Zoellick said.
In one of his last acts before leaving office, former President Bill
Clinton signed tax legislation last November which Washington said
brought it into line with the WTO rules.
But Brussels says the new version is no better than the old.
The two sides agreed in December to WTO arbitration and the panel was
initially given 90 days in which to produce a report.
But before the deadline expired, the panel said that it would need
more time to reach a decision.
