The Elephant Always Forgets: Tax Reform and the WTO
8 Pages Posted: 5 Jan 2018 Last revised: 22 Mar 2018
Date Written: January 1, 2018
The “Tax Cuts and Jobs ACT” (TCJA) enacted on December 22, 2017, includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the Trump administration and its Congressional allies will react to such a loss in a similar fashion as the Bush administration did in 2004, or whether it will defy the WTO, with potential far reaching consequences for the world trade order.
Keywords: TCJA, tax reform, WTO
JEL Classification: H26
Suggested Citation: Suggested Citation