Select Committee on European Union Fortieth Report


Letter from Rt Hon Ian McCartney MP, Minister of State for Trade, Investment and Foreign Affairs, Department of Trade and Industry/Foreign and Commonwealth Office to the Chairman

  I am writing to inform you that the UK Government intends to agree to the adoption of a European Commission proposal to repeal Council Regulation (EC) No 171/2005. The Council of Ministers may be asked to adopt this proposal as early as Friday 19 May 2006, which would prevent Parliamentary scrutiny in the usual way.

  Regulation 171/2005 suspended EU retaliation against US non-compliance with the rulings of the World Trade Organisation (WTO) that its Foreign Sales Corporation (FSC) legislation breaches US commitments to the WTO, following the passage of the Jumpstart Our Business Strength (JOBS) Act in the US in December 2004. EM 15892/04 COM (2004) 822 Final refers.

  However, the Regulation contains provision for the automatic reimposition of retaliatory measures by means of an increase in duty of 14 per cent on imports into the Community of an identified list of products of US-origin, to start 60 days following the adoption of any WTO ruling that the US continues to be in beach of its WTO commitments. The WTO ruled on 13 February 2006 that the US is still in breach of its commitments, and retaliation is therefore set to be reintroduced on Tuesday 16 May.

  In a welcome turn of events, the US Congress has taken further steps to repeal the most contentious residual benefits of the FSC regime, meeting EU concerns. As a consequence, the Commission has put forward as a matter of urgency a proposal to withdraw the implementation of the tariff duty increases against the US which were due to come into effect on 16 May. No draft text has yet been submitted by the Commission.

  I trust you will understand why I am not keeping to the Parliamentary Scrutiny procedures in this instance and would like to give you my assurance that this action is not taken lightly. My Department will send to you the appropriate Explanatory Memorandum for your approval as soon as the Commission issues its written proposal.

17 May 2006

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