WRITTEN QUESTION P-3113/00 by Gerhard Hager (NI) to the Commission. Proposed reaction to reform of the new Foreign Sales Corporations bill.
Date: 2000-09-27
Institutions: European Parliament, Provisional data
Subjects: United States, World Trade Organisation, export subsidy, firm governed by commercial law, foreign enterprise, trade agreement (EU), trade dispute

22.5.2001

EN

Official Journal of the European Communities

C 151 E/67

(2001/C 151 E/079)

WRITTEN QUESTION P-3113/00

by Gerhard Hager (NI) to the Commission

(27 September 2000)

Subject: Proposed reaction to reform of the new Foreign Sales Corporations bill

Reform by Congress of the US legislation on Foreign Sales Corporations is imminent. Under this reform,
taxation of income from sales generated abroad would be abolished. According to US Deputy Treasury
Secretary Stuart Eizenstat, the WTO Appellate Body found that it was entirely a matter for member
countries to decide whether or not the income was taxed. The Commissioner takes the view that the new
arrangements also violate WTO rules.

Against this background:

1.

In the event of the new US export rules actually entering into force, does the Commission intend to
initiate retaliatory trade measures in accordance with Article 133 of the EC Treaty within the 30-day
period laid down under the WTO procedure?

2.

If so, by what means does the Commission propose to defend the EU(cid:146)s interests?

3. What goods, or firms, would be affected by these measures?

4. What alternatives to measures to protect trade within the meaning of Article 133 of the EC Treaty

would the Commission consider implementing?

5. Does the Commission take the view that individual EU Member States are empowered to regulate

taxation of the income themselves?

6.

If not, how, in legal terms, does the Commission justify its view?

Answer given by Mr Lamy on behalf of the Commission

(7 November 2000)

The World Trade Organisation (WTO) panel and appellate body reports adopted by the dispute settlement
body of the WTO have found that the current (cid:145)foreign sales corporations(cid:146) (FSC) legislation provides to
American exporters an export subsidy prohibited by the WTO agreements.

In July 2000, the US Administration submitted to Congress draft legislation to replace the FSC provisions,
but this draft legislation maintains the main elements of the WTO-incompatible legislation, in particular
the export contingency. Indeed, the only way that American companies could benefit from the subsidy (the
tax exemption) as provided under this new draft legislation would be to export. However, Congress could
not adopt the relevant legislation within the deadline of 1 October 2000 set by the WTO to withdraw this
prohibited subsidy. A one-month extension of this deadline has therefore been requested.

In this context of non-respect by the United States of their international obligations, the Community has to
take a number of formal steps to protect its rights and interests. However, in order not to increase the
tension, the Community and the United States concluded on 29 September 2000 an agreement on the
next steps of the dispute settlement procedure.

1. and 2.
The WTO agreement on subsidies and countervailing measures and the WTO understanding
on rules and procedures governing the settlement of disputes (the (cid:145)DSU(cid:146)) states that when a WTO member
fails to bring the measure found to be inconsistent with a WTO agreement into compliance therewith or

C 151 E/68

Official Journal of the European Communities

EN

22.5.2001

otherwise comply with the recommendations and rulings within the timeframe set by the WTO, then the
party which suffers from the non-compliance (here the Community) is authorised to ask an authorisation
from the WTO to apply countermeasures. However, such authorisation is indisputable only if granted
within 30 days after the deadline for compliance.

Therefore, in order to protect its rights under the WTO agreements, the Community is obliged from a
procedural point of view to request the authorisation to apply countermeasures early in the procedure.
Authorisation will be given unless the United States request arbitration on the amount of the counter-
measures. In that case the authorisation of countermeasures is delayed until the ruling of the arbitrators.

3.
The purpose of the countermeasures is to induce the losing party to remove the prohibited export
subsidy. The list of American exports which could be subject to increased customs duties has not yet been
finalised.

4.

Not at this stage.

in conformity with their obligations under the Treaty (for example,

In the Community, direct taxation is mainly the remit of Member States, which have however
5. and 6.
to act
the principle of non-
discrimination) and existing secondary legislation (for example, the directive on intra-company payment
of dividends). However, the issue raised by the Honourable Member is different, as it concerns the respect
by a WTO Member of its obligation not to provide an export subsidy. Indeed, the measure at stake in the
FSC dispute is a subsidy to promote US exports, which is prohibited by the WTO agreements. The fact
that the subsidy takes the form of an income tax exemption or, for example, a grant to companies is
irrelevant from a WTO perspective.

The appellate body has confirmed that (cid:145)a Member of the WTO may choose any kind of tax system it
wishes, so long as, in so choosing, that Member applies that system in a way that is consistent with its
WTO obligations. Whatever kind of tax system a Member chooses, that Member will not be in compliance
with its WTO obligations if
through its tax system, subsidies contingent upon export
performance that are not permitted under the covered agreements.(cid:146)

it provides,

(2001/C 151 E/080)

WRITTEN QUESTION E-3118/00

by Brigitte Langenhagen (PPE-DE) to the Commission

(6 October 2000)

Subject: Use of animal cadavers in meat-and-bone meal

The decision to ban the recycling of (cid:145)fallen(cid:146) farm animals for use in meat-and-bone meal and feed has led
to great uncertainty on the part of the affected farmers, slaughterhouse operators and associations in
Germany. It is feared that the new rules on disposal will incur additional unilateral costs.

Would the Commission state:

1. What are the reasons for this decision? Do they have any scientific basis?

2. What additional costs will be incurred? Who will have to meet them?

3. Does the Commission plan to introduce provisions to enable such costs to be defrayed?

4. Does the Commission recognise the danger that other methods of disposal could be resorted to and

the decision could be circumvented?