November 10, 2000

In an effort to move key legislative priorities through Congress by the end of the session, whenever that may be, lawmakers put together a package of assorted measures on trade and tax relief. The trade measure would reform Foreign Sales Corporation (FSC) rules to comply with a recent World Trade Organization mandate. It's needed to derail European Union threats of trade sanctions if the changes are not made. Supporters say the agricultural tax relief, which includes farm, fish and ranch risk management (FFARRM) accounts, would provide a long-term economic boost to farmers and other rural residents.

American Farm Bureau Federation officials say many of the provisions left on the table when Congress quit to campaign are supported by their farmer-members. President Clinton said FSC reform is a priority, but that he opposes some of the other measures included in the package. Inclusion of the FSC bill is key to the success of the farm tax provisions and the rest of the package. But Senate Majority Leader Trent Lott (R-MS) is urging House members to consider a stand-alone FSC provision already passed by the Senate.

In order to bring the United States in line with the WTO ruling, the bill, which would replace current FSC rules with new ones that would balance the tax burden on U.S. businesses while lowering taxes on European manufacturers, must be signed into law by Nov. 17. The EU originally threatened trade sanctions against the United States beginning on Oct. 1 but extended its own deadline to Nov. 17, a date that could coincide with the administration's next round of so-called "carousel retaliation" for the EU's beef and banana import policies.

Ensuring U.S. compliance with international trade rules is not only important in light of the recent WTO FSC ruling, but simply because we expect other member countries to follow the same set of rules. The United States cannot manage international relations in a "do as I say not as I do" manner, says AFBF.

But separating the FSC issue from the House-passed initial package could scuttle chances for farm-sought tax reform this session. House Republican leaders have said they will not consider FSC as a separate measure and they hope the Senate will move forward with the larger package.

Lawmakers will resume the session the week of Nov.13.