The following story is from today's Associated Press newswire:

GENEVA (AP) — The United States appealed today against a World Trade Organization ruling that its tax breaks for U.S. companies with overseas subsidiaries violate international rules.  The WTO judgment, issued Oct. 8, is potentially politically explosive as it would force fundamental changes in the U.S. Internal Revenue Code.

Trade Representative Charlene Barshevsky said in a statement that the WTO panel "committed multiple legal errors on both substantive and procedural issues.''

The panel upheld a complaint from the European Union against the so-called U.S. Foreign Sales Corporation Program, which grants tax relief to U.S. corporations exporting through offshore subsidiaries.  The EU claims that the program gives U.S. multinationals unfair tax breaks worth $2.5 billion per year.

Barshevsky disagreed that the system was unfair.  "A careful review of the history of this issue, the facts of record, and the applicable WTO legal rules concerning income tax measures should result in a reversal of the panel's decision,'' she said.

The issue will now be considered by the WTO's appellate body, which will issue its findings early next year.

BACKGROUND:  In late September, the WTO ruled that a U.S. tax break popular among multinational companies like the Microsoft Corp. and The Boeing Co. is actually an illegal export subsidy, a decision that could seriously dampen profits at both companies and thousands of other U.S. firms.

One of the main criticisms of the quasi-judicial WTO is that it destroys national sovereignty and threatens countries' ability to establish laws that protect workers and the environment.  Apparently it also threatens the ability of Congress to establish sweetheart tax breaks for U.S. corporations.

The WTO has upheld a European Union challenge of the Foreign Sales Corporations provision of the U.S. tax code, which allows U.S. exporters to exempt up to 15 percent of export earnings by setting up "virtual subsidiaries" in places like the U.S. Virgin Islands, Barbados and Guam.  The provision saves U.S. firms an estimated $2.5 billion annually.  Boeing, the biggest beneficiary of the FSC tax break, saved $130 million in taxes in 1998, according to Business Week (August 16, 1999).

"We welcome the WTO panel's ruling," EU Trade Commissioner Pascal Lamy said when the WTO ruling was announced.  "This U.S. export subsidy has created an important distortion of international trade by granting an unfair advantage to U.S. products in Third World markets."

The WTO has ordered the United States to revise the law by Oct. 1, 2000.  The United States had 60 days to appeal and has now done so.

The United Steelworkers of America announced late today that bargaining will resume with Kaiser Aluminum.  Talks are scheduled for Nov. 1 and 2 and Nov. 10 and 11 in Denver and Spokane, respectively.

The following news release from the United Steelworkers of America was posted last week at www.uswa329.org:

Kaiser Aluminum’s third quarter loss shows that its lockout of employees represented by the United Steelworkers of America at five facilities continues to hurt the company’s operating and financial performance, union representatives said in response to Kaiser’s report (last week) that it had suffered a net loss of $39.2 million during the third quarter of 1999.

"The company’s claims that the labor dispute is having no impact and that its plants are operating at record levels, are clearly not borne out by the numbers," said David Foster, USWA District 11 Director and the union’s chief negotiator with Kaiser.

"The $12.1 million operating loss for the third quarter of 1999 shows clearly that these plants are neither operating well, nor is the dispute behind it," said Foster.

"The third quarter 1999 results bring Kaiser Aluminum's total losses in the four quarters since the labor dispute began to $132.0 million, compared with profits of $53.7 million during the previous four quarters," he added.

The results came as a surprise to Wall Street analysts, who earlier in the week had forecast a loss of just $0.17 per share or $13.5 million for the third quarter. "We hope that the Company will finally heed the messages from its accountants and community leaders. Its time for Kaiser to end the lockout and bargain a new labor agreement," Foster said.

Kaiser Aluminum's revenue was off 3.9% in the third quarter of 1999 compared to the same period in 1998, while shipments of flat-rolled aluminum were off 4.7% and revenue on flat-rolled aluminum was down 15.3%.

While Kaiser blamed the reductions in revenues and shipments on the market, Foster pointed out that the performance of other aluminum producers has recently improved. Alcoa reported a 19% increase in earnings in the third quarter of 1999 over the third quarter of 1998 on stable revenues and shipments, while Reynolds Metals reported a 4.5% gain in aluminum shipments and a 5.6% increase in aluminum revenue. The Aluminum Association said that U.S. aluminum production rose 1% in the third quarter of 1999 from the third quarter of 1998.

"Other producers are making money in this market," said Foster. "If Kaiser is running as well as it claims, why isn't it?"

Workers familiar with operations at the five facilities affected by the lockout report that Kaiser Aluminum continues to suffer from operating problems despite company claims.

"We have reports that the Company is experimenting with shipping molten aluminum by truck from its Mead smelter near Spokane to the rod mill at Tacoma because of chronic problems running the Tacoma potlines," said Bob Marsden, president of USWA Local 7945.

"Those problems are so bad that the company has only been able to restart two of the three potlines, and it may have to shut down one of those," he added.

According to reports received by the union, Kaiser is experiencing a high turnover rate among its replacement workers, and the company "is having serious problems finding replacements for its replacements," Foster said.

Plants staffed by inexperienced replacement workers have also suffered from an epidemic of serious workplace accidents. Injuries severe enough to force the injured workers to lose work increased 65% in the first three quarters of the labor dispute compared to the average for the same period in 1998, according to the most recent data available from the Occupational Safety and Health Administration.

In the worst such incident, an explosion destroyed the company’s alumina refinery in Gramercy, Louisiana, in July, injuring 20 employees. Kaiser has refused to cooperate with an ongoing federal probe into the causes of the blast, and the company’s managers have challenged subpoenas by the Mine Safety and Health Administration, citing the Fifth Amendment’s protection against self-incrimination.

USWA members struck Kaiser Aluminum in response to the company’s unfair labor practices and substandard contract offer on September 30, 1998, and offered to return to work on January 13, 1999. On January 14, 1999, the company locked out over 2,900 USWA members at its plants in Gramercy, Louisiana, Newark, Ohio, and Tacoma and Spokane, Washington.

The latest poll shows support for Initiative 695 has eroded to less than 50 percent with a dramatic shift in the number of union members who say they will vote "Yes" from about 60 percent in September to less than 40 percent last week.   But opposition to the "$30 Car Tab Initiative" has grown only slightly as most of the union respondents shifted from "Yes" to "Undecided."