EU: New Export Tax System No Better

Friday, November 17th 2000, 12:00 am

By: News On 6

BRUSSELS, Belgium (AP) â€” A new U.S. export tax system is just as unpalatable as the one invalidated earlier this year by the World Trade Organization, the European Union said Friday in defense of its request to slap record sanctions on U.S. products.

The 15-nation EU asked the WTO to review the new law.

The EU said it would impose $4.043 billion in sanctions on anything from crispy corn flakes to cold steel if the WTO rules that the law President Clinton signed Thursday is illegal.

``The EU believes that the new law not only maintains the violations found by the WTO ... but may even aggravate them,'' the European Union said in statement.

U.S. Trade Ambassador Rita Hayes disagreed.

``We feel very good about the legislation and we feel like we have implemented the recommendations that were made by the dispute settlement system,'' she said in Geneva, Switzerland, where the WTO is based.

The EU imports about $160 billion in goods from the United States each year. The imports targeted by any sanctions range from live animals to copper and aluminum to books and newspapers.

The EU successfully protested an earlier law that grants U.S. companies billions of dollars in tax breaks for goods sold internationally. The WTO ruled in February that the U.S. Foreign Sales Corporation law amounted to an illegal trade subsidy.

About 6,000 American companies including Microsoft, Boeing and General Motors benefit from the law, which was created in 1984 to offset an EU tax rebate given to European companies for products sold overseas.

The new law, costing $4.5 billion over 10 years above what that law cost, attempts to address the WTO objections by creating new tax breaks that would apply equally to U.S. exports and to products the companies manufacture in their overseas plants.

Clinton had said the new legislation should avert an immediate confrontation with the EU because the WTO must review the U.S. law before authorizing any retaliatory action.

``We plan to continue working with the EU to manage this difference of views responsibly and to avoid any harm to our strong bilateral relationship,'' he said in a statement released Friday.

The review is likely to take several months.

``The EU will leave it to the WTO to rule on this question. That's what the WTO is there for,'' European Trade Commissioner Pascal Lamy said.

The European Commission, the EU's executive arm, expects the United States to challenge any sanctions. If enforced, the sanctions would set off the two economic giants on their biggest trade dispute yet.

Earlier conflicts, including ones over beef and banana imports, ``pale into insignificance,'' EU Commission spokesman Anthony Gooch. said.

The United States previously missed Oct. 1 and Nov. 1 deadlines to enact the replacement law. The EU agreed to hold off on seeking sanctions because the measure was working its way through Congress.