EU pushes for sanctions against US in tax-break dispute

The European Union said today it will seek $4.043bn in trade sanctions against the United States if the World Trade Organisation rules a new U.S. law on foreign sales taxes illegal.

The European Union said today it will seek $4.043bn in trade sanctions against the United States if the World Trade Organisation rules a new U.S. law on foreign sales taxes illegal.

The 15-nation EU had already protested a trade law which grants U.S. companies billions of dollars in tax breaks for goods sold internationally, and said the new law signed by President Clinton on Thursday was just as unpalatable.

"The European Union believes the new legislation is as bad as its predecessor," said EU Commission spokesman Anthony Gooch.

The sanctions sought turn the foreign sales tax issue into the biggest trans-Atlantic trade dispute by far. Other disputes, including on beef and banana imports, "pale into insignificance," Gooch said.

Acting on a complaint by the EU, the WTO in February ruled the U.S. program is an illegal export subsidy.

Clinton said the new tax system should avoid an immediate confrontation with the EU because the WTO must review the U.S. law before authorizing any retaliatory action. The review is likely to take several months.

"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," the president said in a written statement released today during his trip to Vietnam.