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For Immediate Release Contact: Amanda Molk, 202-225-5256 Napolitano Addresses Small Business Exporting Congresswoman Grace Napolitano (D-CA38) joined her colleagues at a House Small Business Committee hearing today in response to the World Trade Organization’s (WTO) negative ruling on the Foreign Service Corporation (FSC) and the Extraterritorial Income (ETI) Exclusion Act. “This ruling will overturn assistance programs for U.S. exporting companies and will be particularly harmful to small businesses. At a time when our small businesses are struggling to survive, we must make sure they have access to the global marketplace,” Napolitano explained. Since 1971, the U.S. government has adopted a system of tax initiatives for U.S. businesses to offset the subsidies provided by foreign governments to companies exporting into the US. The FSC and the ETI are two examples of assistance programs currently in place that provide support to manufacturers and other small business exporters. The ETI allows companies to exclude from taxation a portion of their income from foreign sales, as long as the product generating the income derives 50% of its value from U.S. sources. The WTO determined that these programs are not compliant with WTO rules and that the European Union is entitled to over $4 billion in annual countermeasures against the US if it fails to reverse FSC/ETI. The ruling affects over 65 percent of all U.S. exports. “Without any action by Congress, exporters currently benefiting from FSC/ETI will face a $5 billion annual tax increase. The combination of a weak economy and the WTO’s ruling may force small business exporters into bankruptcy,” noted the Congresswoman. The current trade environment disproportionately favors foreign companies over U.S. small business exporters. Today, America is facing a nearly half a trillion-dollar annual trade deficit. Considering that an estimated 40,000 jobs are created for every billion dollars worth of products exported, the current trade deficit takes nearly 16 million potential jobs out of the U.S economy. “Unemployment remains unacceptably high nationwide, and even higher in many of the cities I represent. It is vital to protect our exporting sector and ensure that more jobs are not lost,” Napolitano commented. There are currently two major legislative responses to the ruling — H.R. 2896, the American Jobs Creation Act of 2003 and H.R. 1769, the Job Protection Act of 2003. The hearing reviewed the merit of both of these proposals which would use the resources gained from ending the initiatives to help affected businesses. “Neither of these proposals is a perfect solution. H.R. 1769 only assists manufacturers, leaving many other small businesses in the cold. H.R. 2896 is geared more toward large corporations. I will continue to work with my colleagues on the Committee to craft a proposal that will help all small businesses cope with the WTO’s ruling and compete in the global market,” Napolitano concluded.
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