July 28,1999

Roth Statement on WTO Panel Decision on the Foreign Sales Corporation Provisions of the Tax Code

WASHINGTON -- Chairman William V. Roth, Jr. (R-DE) released the following statement on the World Trade Organization's ruling on the Foreign Sales Corporation provisions of our tax code:

"I am disappointed that a dispute settlement panel at the World Trade Organization appears to have ruled, in an interim decision, that the Foreign Sales Corporation provisions of our tax code represent a WTO-illegal export subsidy. The panel's decision could have significant implications with regard to both trade and tax policy. That is why I have, as Chairman of the Senate Finance Committee, been watching this case carefully.

"It is premature at this time to discuss the specifics of the decision, given that the panel has not yet finalized its determination and the interim decision itself has not yet been publicly released. I remain convinced, however, that the FSC was structured in such a way as to be WTO-consistent. A fair examination of the WTO rules, the facts of this case and the history of this issue should have led the panel to find in our favor. Therefore, I will want to explore the basis and reasoning underlying the panel's decision to determine if it was sound on its merits.

"Once we have the WTO panel's final determination, I plan to consult with Ambassador Charlene Barshefsky and Treasury Secretary Larry Summers to assess the panel's ruling and to determine what our next step should be. The United States has the right to appeal the decision at the WTO and, if appropriate, I would urge the Administration to exercise that right.

"While we consider what action to take here in the United States, I would also like to examine the broader implications of this decision. After all, many of our trading partners, most notably the European Union, explicitly provide tax rebates on exports. Whether these programs would withstand scrutiny under the logic that the WTO panel appears to have applied in the FSC case is an open question and I expect that we will examine our own rights in light of the WTO panel's reported conclusions. Finally, we should make this unbalanced treatment of tax systems a priority issue for consideration at the next round of WTO negotiations."