By Oct. 1, a controversial system that gives billions of
dollars in tax breaks to American exporters must be scrapped if the US is to meet the terms of a new ruling by the World Trade Organization. A WTO appeals panel in Geneva upheld an earlier decision that international trade rules are violated by the Foreign Sales Corporation program, which allows makers of computer software, chemicals, and other goods to shield some export income from taxes. This is done through "subsidiaries" that the European Union contends are often little more than post-office boxes in offshore "tax havens" such as the US Virgin Islands, Barbados, and Guam. The ruling was welcomed by the EU, which calls the program an illegal subsidy. In Washington, the Clinton administration said the new ruling, the worst defeat for the US to date in an international trade dispute, will spur negotiations to ensure that American companies are not at "a competitive disadvantage" with their European rivals.
Orders to US factories for durable goods - items expected to last at least three years - fell by 1.3 percent last month to a seasonally adjusted $214.8 billion, the Commerce Department reported. But economists cautioned that the drop shouldn't be viewed as weakness in the industrial sector; overall, orders were more than 6 percent higher than for the same month last year. Electronic and electrical equipment registered a 13.2 percent plunge in orders in January, the largest decrease since July 1997. Meanwhile, orders for industrial machinery - a category that includes computers - jumped by 12.3 percent, the strongest pace since February 1985.
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