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• FSC DISPUTE

• Illustrate the effect of such a subsidy for the EU and US producers – this is an export subsidy and illustrated in figure 3.4 (EU) and 3.5 (US)

• Illustrate the effect of sanctions on US imports into the EU market – shown in figure 3.1 effect of a tariff (this would be the EU market)

• What are the motives for this action by the EU? Are there any hidden motives?

Answer

EU motives:

1. Trying to prevent unfair competition – subsidy gives US companies unfair advantage (problem = not much support for this from EU businesses and some EU businesses gain via it eg BP, ICI, Unilever, BASF and Daimler)
2. Retaliation – for losses at WTO over bananas and beef and latest moves due to steel tariffs

US motives/points for FSC

1. Had agreement under GATT (claimed came from earlier GATT challenge by EU re the forerunner to FSC (domestic international sales corporations, Discs), which was also successful and that this was in footnote of Subsidies Agreement
2. Is countering EU system where VAT is recoverable. Also some EU have similar schemes eg Netherlands (Disputed by EU). Prior to FSC, it is claim, EU imports flooded the US in late 1960s and 1970s (due to their subsidies and tax exemptions) – so just countering this.

Other chapter answers >>

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• Case Study 2.1 Porter's Diamond
• Case Study 2.2 The Coffee Market
• Case Study 3.1 Sugar Industry
• Case Study 3.3 Beef Hormones
• Case Study 4.1 SEM Effects of Business
• Case Study 4.2 Africa's Economic Integration
• Case study 5.1 The Effect of Exchange Rates on Businesses – The Us Dollar
• Case Study 5 2 Real Exchange Rates in the Euro-Zone
• Case Study 6.1 SEC to Rethink Post-Enron Rules
• Case Study 6.2 A Controversial New European Directive
• Case Study 8.1 Cross-Border Banking Bids in Italy
• Case Study 8.2 The Future of the London Stock Exchange (LSE)
• Case Study 9.1 Back to Bread and Butter for Europe
• Case Study 9.2 Poductivity in European and International Labour Markets
• Case Study 11.1 Poorer EU Areas Lose Funding
• Case Study 11.2 A Diverse Approach to Curbing Greenhouse Gases
• Case Study 12.1 European and US Entrepreneurship Activity
• Case Study 12.2 EU Enlargement and the SME Sector