Opening Statement of the Hon. Jim Ramstad, a Representative in Congress from the State of Minnesota

Testimony Before the House Committee on Ways and Means

Hearing on the WTO's Extraterritorial Income Decision

February 27, 2002

Mr. Chairman, thank you for holding this important hearing on the WTO’s decision that the United States’ Extraterritorial Income Exclusion Act (ETI) rules amount to an illegal export subsidy.

The ETI structure, and its predecessors the Foreign Sales Corporation (FSC) and the Domestic International Sales Corporation (DISC), were attempts to level the tax playing field for American companies doing business overseas.

Our international competitors have territorial tax systems and many allow Value-Added Tax (VAT) rebates for their companies’ exports.  This structure is acceptable to the WTO, while the U.S. system of worldwide taxation, which taxes the income of American businesses regardless of where they are doing business, combined with an ETI-like structure is unacceptable to the WTO.

While our U.S. trade team deals with the fallout from the WTO decision, we must begin to examine whether the foundations of our worldwide tax system are sustainable if American businesses are to remain competitive in our global economy.  We already have too many examples of former U.S. companies that now are headquartered overseas because of our burdensome international tax system.  The WTO’s most recent decision and the resulting sanctions facing our businesses is another wake-up call for reform.

I look forward to hearing from our witnesses today about possible short-term and long-term solutions to the massive trade challenge we are now facing following the WTO’s ruling.

Thank you, Mr. Chairman.