Washington United States until Nov. 1 to replace a $4 billion annual tax break for American companies that sell goods abroad, from giants Microsoft and Boeing to small businesses.
The Clinton administration was negotiating against a deadline today for bringing U.S. tax laws into compliance with an adverse ruling from the World Trade Organization.
The dispute involves the biggest case the United States has lost before the Geneva-based arbiter of world trade rules.
Congress now has until Nov. 1 to pass the legislation. The EU agreed not to impose any economic penalties until a WTO panel determines whether the new tax system complies with WTO rules.
A top Senate Republican, Finance Committee Chairman William Roth of Delaware, said he was hopeful Congress would approve the legislation "in very short order."
At issue is a U.S. tax program that grants $4.1 billion in annual tax breaks to 6,000 American companies which set up export subsidiaries in offshore tax havens such as the Virgin Islands and Barbados.
The WTO in February ruled that it was an illegal export subsidy.
"The United States and European Union today demonstrated a commitment to avoid escalating trans-Atlantic trade tensions and managing this WTO trade dispute responsibly," U.S. Trade Representative Charlene Barshefsky said in a statement.