"Mr. President, I am extremely disappointed by the adverse decision handed down in Geneva today by the WTO Appellate Body in the Foreign Sales Corporation case, sometimes called the FSC case.
The Appellate Body decision essentially means the Foreign Sales Corporation rules in our tax code violate WTO rules.
I believe that the Appellate Body fundamentally misunderstood the nature and intent of the Foreign Sales Corporation plan. The FSC plan was designed to address the competitive disadvantage faced by United States businesses that compete with foreign firms in European countries that have value-added tax regimes.
When products from countries with VAT regimes are exported, they typically get rebates of the value-added tax. But because the United States relies on the corporate income tax, and not on a VAT, our exporting firms don't enjoy this type of tax benefit. This makes our exports less competitive in world markets.
The FSC rules were designed to create a level playing field with these European tax systems.
Mr. President, the Appellate Body decision is a very serious development because it comes at a time when the WTO itself is under attack. In my view, these attacks are unwarranted and unjustified.
We must not allow this setback to undermine either the WTO or our support for this vital institution. I will do everything I can to make sure this does not happen.
I the meantime, I strongly urge President Clinton to attempt to negotiate a settlement with the European Union. This should be President Clinton's number one priority at the G 8 Summit in Okinawa later this year.
I also urge the European Union not to take any retaliatory action against the United States until the President has the opportunity to personally discuss the case with EU leaders at the Okinawa Summit.
Mr. President, we must make sure that we observe the rule of law, in this case, and in every case involving international trade disputes. We expect no less of our trading partners, and we must do the same.
But I hope that when we address this case, we bear in mind that while the outcome of the case itself is very important, there is something else at stake.
That is the integrity of our international trading system.
We must remember that the WTO benefits every farmer and every business that sells its goods or services in foreign markets If we didn't have a WTO, and the discipline of the rule of law in international trade, we would have only the rule of the jungle. Those that would suffer the most would be the small exporters. In the United States, two-thirds of all businesses that export have 20 or fewer employees. It is the WTO that prevents these small firms from being dominated by their larger competitors in the international marketplace.
Mr. President, let's make sure we get an appropriate and fair resolution of this case. And let's make sure we maintain our strong support for the WTO."