In 2000 the EU asked the WTO to authorise trade sanctions against the United States for up to a maximum amount of $4 billion in the FSC (Foreign Sales Corporations) trade dispute. As required by the WTO, the EU also submitted an indicative list of those products that would be eligible for sanctions. This list included a vast range of engineering products, including electrical, electronic or mechanical components or subassemblies which are included in final products manufactured in Europe, as well as equipment manufactured by subsidiaries of European companies manufacturing in the USA. If penalising simple products has a measurable effect, penalising complex engineering goods only has a knock-on effect on the customers of our industry, i.e. the engineering industry itself and all other manufacturing industries in Europe and in our export markets.

 

 

 

 

We intend to ensure that European products are not affected by the tax dispute and insist that every effort should be made in general to avoid an escalation of the FSC trade conflict between the EU and the US.

Following the issue of several positions and successful joint lobbying by Orgalime and its national member associations, the Commission removed a large number of our products from its revised list. The list was submitted to the WTO and finally on 7 May 2003, the WTO Dispute Settlement Body authorised the European Union to increase customs duties on American products for a total of $4 billion.

A few months afterwards the American business community increasingly put the US-Congress under pressure. Congress eventually reacted and has now adopted a Bill repealing the FSC/ETI legislation. The Commission welcomed the step towards US compliance with the WTO, and proposed the lifting of sanctions retroactive as of 1 January 2005, which EU ministers eventually adopted on 31 January 2005. Due to the retroactive effect, manufacturers hit by the sanctions can claim the sanctions duties paid since 1 January 2005. The new Regulation provides for suspension of duties until 1 January 2006 or 60 days after the World Trade Organisation's Dispute Settlement Body has confirmed the incompatibility with its rules of certain aspects of the FSC successor legislation, the American Jobs Creation Act.

 

Picture Courtesy of Atlas Copco