The document discusses the US Congress's reluctance to scrap the Foreign Sales Corporation (FSC) tax break and the potential consequences if the US fails to amend its tax law. The FSC produced large tax savings for US exporters and encouraged more exports to balance the trade deficit. If the law is not amended, the EU will likely impose $4.04 billion in punitive tariffs but may not immediately enforce sanctions to give the US time to adjust. Most experts believe the EU would use the threat of sanctions as leverage rather than disrupt transatlantic trade, and any trade war would decrease welfare for all nations.
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The document discusses the US Congress's reluctance to scrap the Foreign Sales Corporation (FSC) tax break and the potential consequences if the US fails to amend its tax law. The FSC produced large tax savings for US exporters and encouraged more exports to balance the trade deficit. If the law is not amended, the EU will likely impose $4.04 billion in punitive tariffs but may not immediately enforce sanctions to give the US time to adjust. Most experts believe the EU would use the threat of sanctions as leverage rather than disrupt transatlantic trade, and any trade war would decrease welfare for all nations.
Original Description:
Class B Grp 03 \
Seminar 03 \
Is Tax Break an Export Subsidy \
Qn03 and Qn04
Original Title
Grp03 S03 - Is a Tax Break an Export Subsidy Qn03 n Qn04
The document discusses the US Congress's reluctance to scrap the Foreign Sales Corporation (FSC) tax break and the potential consequences if the US fails to amend its tax law. The FSC produced large tax savings for US exporters and encouraged more exports to balance the trade deficit. If the law is not amended, the EU will likely impose $4.04 billion in punitive tariffs but may not immediately enforce sanctions to give the US time to adjust. Most experts believe the EU would use the threat of sanctions as leverage rather than disrupt transatlantic trade, and any trade war would decrease welfare for all nations.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
The document discusses the US Congress's reluctance to scrap the Foreign Sales Corporation (FSC) tax break and the potential consequences if the US fails to amend its tax law. The FSC produced large tax savings for US exporters and encouraged more exports to balance the trade deficit. If the law is not amended, the EU will likely impose $4.04 billion in punitive tariffs but may not immediately enforce sanctions to give the US time to adjust. Most experts believe the EU would use the threat of sanctions as leverage rather than disrupt transatlantic trade, and any trade war would decrease welfare for all nations.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
occur if the U.S. Government fails to amend its tax law? Would the EU impose sanctions? What would the U.S. response Why U.S. Congress was apparently so reluctant to scrap the FSC? Pressurized by Surging Trade Deficit
Foreign Sales Corporate (FSC) is a
kind of export subsidy
FSC Produces Large Tax Saving for
U.S. Export (e.g. $3.5 bill income tax saved in 1998)
FSC Encourage U.S. Exporter to export
more to balance the trade deficit
To compensate US companies for EU
What do you think might occur if the U.S. Government fails to amend its tax law? Would the EU impose sanctions? What would the U.S. response be? If U.S. Government fails to amend its tax law, EU will impose an punitive tariffs worth $4.04 billion on U.S exports to the EU. However, EU will not immediately exercise it’s right to impose sanctions against U.S or and will almost not impose it but by giving U.S more time to make adjustment.
In response, U.S will find ways to change the
internal What do you think might occur if the U.S. Government fails to amend its tax law? Would the EU impose sanctions? What wouldthe U.S. Most response view observers be? it as unlikely that the European Union will implement the sanctions, since the disruption that would cause transatlantic trade to rebound on European companies; it is likely rather than the EU will seek to use the threat of sanctions as a bargaining chip to obtain concessions from the US in other areas.
A trade war refers to two or more nations raising
or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. It is the opposite of free trade.
Economists generally believe trade wars are very
non-productive and decrease the economic welfare and total social surplus of all nations involved. However, political scientists may see the threat of a trade war as helpful in winning a concession of