September 1, 2002	Sunday	Jamadi-us-Saani 22,1423

WASHINGTON, Aug 31: The United States on Friday said it was “disappointed” with a World Trade Organization ruling that opens the door for the European Union to impose sanctions on $4 billion worth of goods in a long-running dispute over US tax breaks for exporters.

But top Bush administration aides also downplayed the decision, saying they did not expect the EU to take any action as long as the United States is moving forward on legislation to bring its tax law into line with international rules.

I am confident that today’s findings regarding damages will be rendered moot by our coming into compliance, US Deputy Treasury Secretary Kenneth Dam said in a statement.

We look forward to working with the Congress to enact changes to our tax law that will preserve the competitiveness of US businesses and American workers while honoring our WTO obligations, Dam said.

However, a State Department official warned the EU against expecting quick results.

This compliance will take time, the aide said.

The latest ruling ended months of suspense over the amount of sanctions the EU could apply in the case, which stretches back to the late 1990s.

In January, the WTO ruled for the fourth time that US tax breaks benefiting exporters such as Boeing Caterpillar and the Walt Disney Co. were illegal subsidies under WTO rules.

An arbitrator ruling on the amount of sanctions the EU could apply in the case was originally expected in April, but was delayed a number of times.

The EU asked for the right to retaliate on $4.043 billion in goods, based on the annual value of the tax breaks to US companies. The United States argued $1 billion was a more appropriate figure, which it said represented the actual damage done to EU exporters by the provision.

I’m disappointed the arbitrator did not accept the lower figure put forward by the United States, US Trade Representative Robert Zoellick said in a statement. We believe that $1 billion is much more accurate.

Nevertheless, the key point, as the President has said, is that the executive branch will work with Congress to fully comply with our WTO obligations, Zoellick added.

In Brussels, EU Trade Commissioner Pascal Lamy urged US lawmakers to move quickly to change the tax law. The path is now clear for the EU to adopt sanctions if the US does not repeal the (tax break) scheme expeditiously, Lamy said.

However, congressional aides and trade analysts said it was unlikely Congress would pass new tax legislation this year.

I don’t think there’s any chance of doing it before 2003, said a Senate Finance Committee aide.

A bill introduced in the House of Representatives by Ways and Means Committee Chairman Rep. Bill Thomas, a California Republican, — and cited by Lamy as a sign of progress — has run into opposition from Boeing and some other current beneficiaries of the tax break.

Meanwhile, Senate Finance Committee Chairman Sen. Max Baucus, a Montana Democrat, and Sen. Charles Grassley, an Iowa Republican, have called for the Bush administration to take the lead in developing legislation by putting together a working group of experts from the executive branch and Congress.

In a statement, Thomas gave no hint of any willingness to abandon his bill. However, Rep. Charles Rangel of New York, the top Democrat on the Ways and Means panel, also endorsed the approach advocated by Baucus and Grassley.

Gary Hufbauer, a trade policy expert at the Institute for International Economics, said he doubted the EU would impose sanctions even if Congress does not pass a bill this year.

However, the ruling gives the EU’s Lamy “a huge club” that he can exploit to Europe’s advantage in other trade disputes with the United States, Hufbauer said.

The sanctions decision also poises a potential threat to US farmers. Agricultural goods dominated a preliminary sanctions list published by the EU in November 2000.

EU officials on Friday said they would fine tune that list when they take the next procedural step of formally asking the WTO for permission to retaliate. They noted there was no precise deadline for them to take that action.—Reuters