EU Seeks OK to Hit U.S. With Sanctions

The European Union will seek World Trade Organization permission this week to impose billions of dollars in sanctions on U.S. exports despite U.S. passage of reforms to a controversial export tax-break scheme. EU trade spokesman Anthony Gooch said the bloc still planned to file its request for authorization of sanctions by Friday even though the U.S. Congress gave final approval to a law reforming the so-called Foreign Sales Corporation scheme. The old FSC scheme granted around $4 billion a year in tax breaks to big exporters such as aircraft maker Boeing Co. and software giant Microsoft Corp. through subsidiaries in tax havens such as the Virgin Islands, Barbados or Guam. The EU argues that the new legislation, expected to be swiftly signed into law by President Clinton, has similar faults to the old scheme, which the WTO found in February was an illegal export subsidy. Passage of the law means the EU will follow an agreement reached with the U.S. in September, Gooch said. Under that accord, the EU agreed to follow lengthy WTO procedures that mean it would not be in a position to actually impose sanctions until mid-2001--if the WTO agrees with it that the new U.S. law breaks global trade rules. U.S. officials have warned that if the EU imposes sanctions on that scale, it could unleash a full-scale trade war.