EU delays subsidy fines

Associated Press

WASHINGTON — A last-minute agreement Saturday with the European Union gives the United States until Nov. 1 to replace a $4 billion annual tax break for American companies that sell goods abroad, from giants Boeing and Microsoft to small businesses.

The Clinton administration was negotiating against a deadline toSday for bringing U.S. tax laws into compliance with an adverse ruling from the World Trade Organization. The dispute involves the biggest case the United States has lost before the Geneva-based arbiter of world trade rules.

Congress now has until Nov. 1 to pass the legislation. The EU agreed not to impose any economic penalties until a WTO panel determines whether the new tax system complies with WTO rules.

A top Senate Republican, Finance Committee Chairman William Roth of Delaware, said he was hopeful Congress would approve the legislation "in very short order."

At issue is a U.S. tax program that grants $4.1 billion in annual tax breaks to 6,000 American companies that set up export subsidiaries in offshore tax havens such as the Virgin Islands and Barbados.

The WTO in February ruled that it was an illegal export subsidy.

"The United States and European Union today demonstrated a commitment to avoid escalating trans-Atlantic trade tensions and managing this WTO trade dispute responsibly," U.S. Trade Representative Charlene Barshefsky said in a statement.

In a separate statement, Pascal Lamy, Europe’s top trade negotiator, said, "Our priority is to resolve disputes, not exacerbate them."

The Foreign Sales Corporation program was created in 1984 to enable U.S. companies, including Boeing, Microsoft, General Motors and United Technologies, to reduce U.S. corporate income taxes by 15 percent by creating export subsidiaries.

The program was intended to offset an EU tax rebate given to European companies for products sold overseas. The replacement legislation would create new tax breaks that would apply equally to U.S. exports and to products the companies manufacture in their overseas plants.

The extension gives Congress more time to complete work on the replacement legislation and helps to defuse trade tensions between the United States and the EU, the world’s two largest trading partners.

A senior U.S. trade official expressed optimism that Congress would approve the legislation by the new deadline.

A challenge by the EU would take at least six months. If the EU were to win its case against replacement legislation, only then could it push for clearance to file for penalties.

That would mean that any penalties on U.S. imports would not appear until next summer at the earliest. The EU, however, is expected to publish a preliminary target list by late November.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Local News

FILE - A sign hangs at a Taco Bell on May 23, 2014, in Mount Lebanon, Pa. Declaring a mission to liberate "Taco Tuesday" for all, Taco Bell asked U.S. regulators Tuesday, May 16, 2023, to force Wyoming-based Taco John's to abandon its longstanding claim to the trademark. (AP Photo/Gene J. Puskar, File)
Hepatitis A confirmed in Taco Bell worker in Everett, Lake Stevens

The health department sent out a public alert for diners at two Taco Bells on May 22 or 23.

VOLLI’s Director of Food & Beverage Kevin Aiello outside of the business on Friday, May 19, 2023 in Marysville, Washington. (Olivia Vanni / The Herald)
Coming soon to Marysville: indoor pickleball, games, drinks

“We’re very confident this will be not just a hit, but a smash hit,” says co-owner Allan Jones, who is in the fun industry.

Detectives: Unresponsive baby was exposed to fentanyl at Everett hotel

An 11-month-old boy lost consciousness Tuesday afternoon. Later, the infant and a twin sibling both tested positive for fentanyl.

Cassie Franklin (left) and Nick Harper (right)
Report: No wrongdoing in Everett mayor’s romance with deputy mayor

An attorney hired by the city found no misuse of public funds. Texts between the two last year, however, were not saved on their personal phones.

Firearm discovered by TSA officers at Paine Field Thursday morning, May 11, 2023, during routine X-ray screening at the security checkpoint. (Transportation Security Administration)
3 guns caught by TSA at Paine Field this month — all loaded

Simple travel advice: Unpack before you pack to make sure there’s not a gun in your carry-on.

Heavy traffic northbound on 1-5 in Everett, Washington on August 31, 2022.  (Kevin Clark / The Herald)
To beat the rush this Memorial Day weekend, go early or late

AAA projects busy airports, ferries and roads over the holiday weekend this year, though still below pre-pandemic counts.

Logo for news use featuring the municipality of Snohomish in Snohomish County, Washington. 220118
Troopers: DUI crash leaves 1 in critical condition in Maltby

A drunken driver, 34, was arrested after her pickup rear-ended another truck late Tuesday, injuring a Snohomish man, 28.

Housing Hope CEO Donna Moulton raises her hand in celebration of the groundbreaking of the Housing Hope Madrona Highlands on Tuesday, May 23, 2023 in Edmonds, Washington. (Olivia Vanni / The Herald)
$30M affordable housing project to start construction soon in Edmonds

Once built, dozens of families who are either homeless or in poverty will move in and receive social and work services.

A south-facing view of the proposed site for a new mental health facility on Thursday, Oct. 13, 2022, near 300th Street NW and 80th Avenue NW north of Stanwood, Washington. (Olivia Vanni / The Herald)
County Council OK’s Stanwood behavioral health center

After an unsuccessful appeal to block it, the Tulalip Tribes are now on the cusp of building the 32-bed center in farmland.

Most Read