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Committee on Ways and Means
Subcommittee on Select Revenue Measures

For Immediate Release
Contact: Press Office 202-225-8933
April 9, 2002

WASHINGTON - Tomorrow marks the first in a series of hearings on the recent rulings made by the World Trade Organization (WTO). Legislators will explore whether minor adjustments can be made to the Extraterritorial Income Exclusion Regime (ETI) to bring it into compliance with the WTO's ruling or whether compliance will require more fundamental reforms of our tax code.

On January 14, 2002, the WTO Appellate Panel issued its report finding the United States' ETI rules to be a prohibited export subsidy. This marks the fourth time in the past two and one-half years that the United States has lost this issue, twice in the Foreign Sales Corporation case and now twice in the ETI case. There is no opportunity for the United States to appeal this latest determination.

On January 29, 2002, a WTO Arbitration Panel began proceedings to determine the amount of retaliatory trade sanctions that the European Union (EU) can impose against U.S. exports to the EU. The EU has requested $4.043 billion in sanctions. The United States has asserted that the proper measure of sanctions is no more than $1.1 billion. The Arbitration Panel will issue its determination by April 29, 2002.

Chairman Jim McCrery (R-LA), said, “With the arbitration panel poised to rule on the level of sanctions which can be imposed by the EU, it is critical that we make a prompt, yet thorough inquiry into possible changes to the ETI system which are both WTO-compliant and foster the competitiveness of American companies.”