Over objections from the European Union, the US House of Representatives is expected today to approve legislation overhauling a multibillion-dollar programme of tax breaks for American exporters that threatens to spark a transatlantic trade war.
House Republican and Democratic leaders said they expected the measure, which would replace the controversial Foreign Sales Corporation (FSC) programme, to pass overwhelmingly.
The legislation would then move to the Senate for final approval later this month, even though the EU says the legislation fails to bring the FSC programme - which offers up to $4 billion (€4.64 billion) a year in tax breaks to US exporters - into line with the World Trade Organisation (WTO) rules.
The EU's rejection of the reform plan has raised the prospect that Brussels would seek WTO approval to impose sanctions on US exports that could run to billions of dollars. US officials said that could lead to an all-out trade war between the world's biggest trading blocs.
"We have developed a proposal that is in fact and law WTO compatible, and we hope that will be recognised by the EU and we hope that this will be resolved without confrontation," Deputy US Treasury Secretary Stuart Eizenstat told reporters in New York when asked about the trade dispute.
"They've refused to negotiate, they refused to provide any suggestions of how our proposal can be modified to deal with their concerns," he said. "We have no choice but to go forward."
