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. Last Updated: 07/27/2016

Europe Still Unhappy With U.S. Tax Subsidy

WASHINGTON -- Just when lawmakers thought a thorny tax dispute was behind them, the European Union raised objections on Friday to parts of the $137 billion corporate tax bill that was passed last month.

The measure was three years in the making and was intended to do away with a tax cut for American exporters that was declared illegal by the World Trade Organization.

Rather than simply outlawing the tax subsidy system, the U.S. Congress replaced it with three times the number of tax cuts, involving nearly every sector of the economy from tobacco farmers to shipbuilders.

The European Union applauded the United States for doing away with the old tax cut and said it would remove the $4 billion in sanctions it had imposed against American products after winning the WTO ruling.

But on Friday, the Europeans asked for talks with the United States to question why some of the biggest American corporations should be given a three-year grace period or transition before the original tax cut was ended.

"We have consistently raised concerns about grandfathering and other transition issues," Anthony Gooch, the European Union spokesman in Washington, said. "But we are still in train to lift sanctions by Jan. 1."

The U.S. administration contends that the Europeans are raising the issue after the fact, in part to show their dissatisfaction with a new trade dispute filed at the WTO by the United States over European subsidies for Airbus.

In retaliation, the European Union filed a similar complaint against American subsidies for Boeing, one of the corporations that will benefit from the three-year transition period in the new corporate tax bill.

"The EU had expressed willingness before to grandfather some contracts," said Richard Mills, spokesman for the office of the U. S. trade representative.

"This is not only standard practice in tax legislation in the United States but also in a number of EU members."

After years of debate and a final marathon of arm-twisting to pass the bill and get it signed by U.S. President George W. Bush last month, lawmakers have warned that they will look unkindly at foot-dragging by the Europeans.

Gooch, the European Union spokesman, said that on the contrary, the Europeans were moving with remarkable speed to erase the $4 billion in sanctions.

Further discussions about transition did not undo Europe's approval of the repeal of the tax cut for exporters, he said.

"This is a real model of how to settle disputes," Gooch said.

"Our negotiations were very gentlemanly stuff compared to other disputes."