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When you think of the export subsidies, tarriffs, quotas etc etc that the EEC has imposed on exporters such as Australia and NZ over the years I find it incredible that the WTO can rule against the US over tax breaks but not against the EEC's punitive regime.

For that matter I find it incredible that both Australia and NZ have the Queen as their head of state, a long history of supporting the UK in all the wars it has fought and yet our citizens are excluded from the UK as permanent settlers and our goods are excluded from the EEC apart from token amounts. I also find it incredible that citizens of former enemies of the UK namely Germany are allowed freely to import their goods and their citizens have free right of abode. Would someone please tell me how Morrocco can become part of the EEC with all the rights to live and work in the UK and yet Australian and NZ citizens cannot. Truly the UK has stabbed us in the back.

The World Trade Organisation ruled against Washington in a row with the European Union over tax breaks for exporters, opening the way for a possible $4 billion in retaliatory duties by Brussels.

The WTO's Appellate Body rejected a bid by the United States to overturn earlier WTO rulings that the tax scheme violated international trade rules, they said.

"We have won on all points. It is a full victory," one EU source in Geneva, who asked not to be named, told Reuters. The WTO is due to make an official announcement.

Brussels can now ask another WTO panel to fix the level of trade sanctions to be imposed unless Washington revises the disputed tax scheme, which benefits major corporations such as Microsoft and Boeing.

The European Union has said it will seek up to $4.04 billion in additional duties on U.S. goods. However, the panel, which has 60 days to decide, could opt for less.

Most European and US trade experts had expected the judicial panel to support earlier findings by the WTO that the United States was in the wrong.

But they added that Brussels may hesitate before hitting back at US goods for fear the dispute could degenerate into an all-out trade war which the EU might lose.

US Trade Representative Robert Zoellick said the EU retaliation threat amounted to "using a nuclear weapon" against the global trading system.

The ruling comes as both sides are about to face off over their steel industries, with Washington considering whether to give import protection through higher tariffs to struggling US companies.

Brussels has dismissed any suggestion of a trade-off between the two trade issues.

But US officials admit Washington's options are limited after the appeals court upheld rulings that the tax system gave illegal export subsidies and discriminated in favour of US goods in breach of WTO rules. Washington has already tried redrafting the tax rules - which grant cuts in tax payments by firms which use off-shore subsidiaries as exporting arms - but Brussels said the new version was just as discriminatory as the old.

In any case, the United States would not have time to come up with an alternative before any sanctions came into force.

The United States could seek to defuse the issue by offering "compensation" through lower US tariffs or by calling for the matter to be included in a new global round of trade talks due to begin this year under the auspices of
the WTO.
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