The European Union has prevailed in its row with the United States over export tax breaks which could lead to fresh EU trade sanctions, a source familiar with a ruling by the World Trade Organisation said on Monday. "It went all the EU's way," said the source, who had knowledge of the confidential preliminary ruling in the dispute on whether Washington had abided by an earlier WTO order to remove illegal corporate tax concessions.
Washington says that the offending tax advantages, which benefit major companies such as aviation giant Boeing, were revoked under a law approved by Congress last October.
But the EU said the regulations left much of the export aids in place and asked the Geneva-based trade body for a ruling.
Neither Washington nor Brussels has officially commented on the decision reached by a panel of WTO trade judges following a six-month investigation.
The tax breaks, previously known as the Foreign Sales Corporation (FSC) law, were repeatedly declared illegal by the WTO, but the move to repeal them came after the EU was given the right to levy punitive duties on $4.0 billion of US exports.
The sanctions were by far the biggest ever awarded by the WTO in its 10-year life. They began in March 2004 with an initial duty of 5 percent on a broad range of products from steel to textiles and rose to 14 percent by the end of the year.
Brussels lifted the sanctions in January 2005, but warned at the time that it could re-impose them on 60 percent of the goods if the WTO declared the United States to be in continuing breach.
Brussels was angry that the new US law allowed two years of transitional aid for companies that had benefited from the concession. Exporters that had signed binding contracts before September 17, 2003, would continue to receive the tax break.
The verdict of the WTO trade panel should be made public next month. It was not immediately clear whether the US had the right to appeal.
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