The USA will possibly face the most punitive trade sanctions in the history of the World Trade Organisation if the European Union is granted the right to act on a WTO ruling that US tax breaks for exporters are a violation of global trade rules.
This is entirely a self inflicted wound for the USA. Unlike the vast majority of the rest of the world, the USA claims tax from companies based on their global activities. Quite apart from the fact this is manifestly iniquitous, it is also pretty damn stupid economically. Although EU nations do not attempt to tax globally, the European states tend to subsidise their favoured companies in various ways (which is also stupid from a macro-economic perspective). This in turn has lead the US to deduce for the last 31 years that certain businesses operating in competition with subsidised EU companies should be given tax breaks to help them compete more evenly. There is just one problem with that: making special cases in that manner violates WTO treaty rules.
The solution for the US is of course simplicity itself: just abolish all US taxation at the water’s edge like the rest of the world does… no special cases therefore exist. Result? American businesses overseas flourish without the absurd and wildly expensive accounting gymnastics needed to avoid actually paying very much tax to the American IRS on corporate operations in Mongolia (or wherever).
The fact is, of the medium and small businesses I know of run by Americans overseas, the reality is that they successfully shelter the vast majority of their operations from the US tax man. So why not just recognize that there is no justification for this very hard to enforce ‘taking’ by the IRS… what reasonable pecuniary interest does the US state have on economic activity beyond its shores? Scrap this extraterritorial intrusion and not only is justice served, the WTO problem simply disappears with a loud ‘poof’!
