*EPF214 11/14/00
Text: Barshefsky, Eizenstat on House Passage of New FSC Tax
(WTO must review replacement legislation) (820)
U.S. Trade Representative Charlene Barshefsky and Treasury Deputy Secretary Stuart Eizenstat issued statements November 14 praising the House of Representatives for passing legislation to replace the Foreign Sales Corporation (FSC) tax program. Both officials said the new legislation satisfies U.S. obligations to the World Trade Organization (WTO).
The WTO ruled that the FSC tax rules -- which exempted from U.S. income taxes certain export income earned by foreign subsidiaries of U.S. companies -- amounted to an export subsidy and thus violated WTO agreements. The European Union threatened to impose retaliatory tariffs on U.S. imports if the tax regime remained WTO-inconsistent.
The new FSC repeal and replacement legislation alters the U.S. tax regime to exclude from U.S. tax a certain portion of a corporation's foreign sales income -- without regard to whether the income derived from exports. Under a U.S.-EU procedural agreement reached in September, the WTO must review the legislation before any decision authorizing retaliation can be made.
The Senate approved the replacement legislation November 1. President Clinton is expected to sign it into law.
Following are the texts of Barshefsky's and Eizenstat's statements:
(begin text of Barshefsky statement)
Office of the United States Trade Representative
Executive Office of the President
Washington, D.C. 20508
www.ustr.gov
November 14, 2000
USTR BARSHEFSKY APPLAUDS HOUSE PASSAGE OF FSC REPEAL AND REPLACEMENT LEGISLATION
United States Trade Representative Charlene Barshefsky today praised House passage of the Foreign Sales Corporation (FSC) repeal and replacement legislation by a vote of 316 to 72, and thanked House and Senate leaders for efforts on this measure. In particular, Ambassador Barshefsky expressed appreciation to House Minority Leader Dick Gephardt, House Ways and Means Committee Chairman Bill Archer, Congressman Charlie Rangel, Senator Majority Leader Trent Lott, Senate Minority Leader Tom Daschle, Senate Finance Committee Chairman William Roth, and Senator Daniel Patrick Moynihan.
"The strong bipartisan support to pass the FSC repeal and replacement legislation demonstrates the United States' commitment to abide by its WTO obligations," said Ambassador Barshefsky. "The legislation fully addresses the WTO panel's findings and should put an end to this matter."
Background:
On September 30, 2000 the United States and the European Union reached agreement on certain procedural steps to be taken after passage of the FSC replacement legislation. The procedures are similar to those used in the Canada-Australia salmon dispute. The essential feature of the agreement provides for sequencing of WTO procedures as follows: 1) a panel will determine the WTO-consistency of FSC replacement legislation (the parties retain the right to appeal); 2) only after the appeal process is exhausted would an arbitration over the appropriate level of sanctions be conducted if the replacement legislation was found WTO-inconsistent. With few exceptions, the time frames set forth in the Dispute Settlement Understanding (DSU) for such adjudications are reflected in this agreement.
Contact: Brendan Daly, Amy Stilwell, Todd Glass (202) 395-3230
(end text of Barshefsky statement)
(begin text of Eizenstat statement)
U.S. Department of the Treasury
Office of Public Affairs
Washington, D.C.
www.treas.gov
November 14, 2000
STATEMENT BY TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT
We are very pleased by the House passage today of legislation to repeal and replace the current FSC regime. This legislation has important consequences for jobs, the national economy, and international relations with some of our most important trading partners. Today's House action clears the way for the legislation to be signed into law by President Clinton.
This legislation is absolutely essential to avoiding the potential imposition by the European Union of significant sanctions on American industries, and to satisfying the United States' obligations in the WTO. We believe that this legislation addresses the concerns raised by the WTO Appellate Body and that it will be found to be WTO-compliant. Moreover, under a procedural agreement reached between the European Union and the United States, enactment of this legislation will avoid an immediate confrontation with the EU by ensuring that the World Trade Organization must review the new law before any decision authorizing retaliation may be made. We plan to continue working with the EU to manage this dispute responsibly and to avoid any escalation of tensions that could harm our strong bilateral relationship, and we remain open to further discussions with the EU about resolving this dispute.
We commend the House and Senate bipartisan leadership, including Speaker Hastert, Minority Leader Gephardt, Chairman Archer, Ranking Member Rangel, Majority Leader Lott, Minority Leader Daschle, Chairman Roth, Ranking Member Moynihan, and their staffs, for their efforts on this important legislation. We also want to thank the staff of the Joint Committee on Taxation, the House Ways and Means Committee, and the Senate Finance Committee for their hard work in fashioning this legislation.
(end text of Eizenstat statement)
(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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