November 15 , 2000

The House Tuesday approved a bill to repeal and replace the Foreign Sales Corporation, sending the measure to President Clinton for an expected quick signature. U.S. trade officials believe the bill should forestall punitive duties on U.S. goods exported to European Union member nations, but the EU appears determined to go ahead with the retaliation.

In addition, unilateral consideration of the FSC bill probably reduces the likelihood of any further agriculture-supported tax measures for this Congress.

U.S. Trade Representative Charlene Barshefsky said the bipartisan vote of 316-72 "demonstrates the United States' commitment to abide by its WTO obligations. The legislation fully addresses the WTO panel's findings and should put an end to this matter."

On Sept. 30 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. A panel will determine the WTO-consistency of FSC replacement legislation (the parties retain the right to appeal); 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.

However, news reports said the issue appeared far from settled. The WTO had ruled last February that the FSC program was an illegal export subsidy. That was a major trade victory for the EU. The United States was told to repeal the FSC by Oct. 1 but missed that deadline as well as a second cutoff date of Nov. 1. The EU imposed a final deadline of Nov. 17.

A REUTERS article explains that Republican leaders initially had included the FSC overhaul in their $240 billion tax-cut package. But under pressure from big business, they agreed to move the FSC separately. That appears to doom the larger tax measure for the year.