This is a partial transcript from Your World with Neil Cavuto, January 16, 2002. Click here for complete access to Neil Cavuto's CEO interviews. 

NEIL CAVUTO, HOST: Well, the U.S. getting slammed with a ruling that could have some very heavy consequences. You might have missed this one, but it's important.

Yesterday, the World Trade Organization ruled that a U.S. tax break for exporters violated global trade rules. That means heavy sanctions may be on their way. But should we heed the rules of the WTO, or just say, stick it, let's keep doing what we've been doing.

Joining me now from Denver is Colorado Congressman Thomas Tancredo. He has some thoughts on this very special relationship. Congressman, good to see you again.

REP. THOMAS TANCREDO (R), COLORADO: Likewise. Good to be here.

CAVUTO: What would you say to the WTO?

TANCREDO: Well, I'll tell you this: First, I'd say, I'm sure not surprised at your ruling. And I would tell anybody listening to this program that they should never be surprised by a ruling against the United States by the WTO.

We're always going to get hometowned by that bunch. It's the problem with the way that the whole appellate system is set up over there. So we've got really three choices, Neil. We either submit, we demand reform in the process, or we get out.

CAVUTO: All right. But, you know, Congressman, a lot of people reacted and said, oh look, the U.S. didn't get its way. They just take their marbles and cry and go home.

TANCREDO: Well, they can say that, but the reality is this: We were held to be in violation of trade law because a process that allows us to give corporations some tax breaks for things they sell outside the United States. Well, in effect, of course, they are condemning their own system. The EU is condemning their own system by ruling against us. And I will be very interested to see whether or not we will ask for some sort of ruling against them for their territorial tax system. In the EU...

CAVUTO: We should stop their, Congressman, because you know this stuff like the back of your hand. But we should say that they allow companies to only essentially write charges or taxes based on that that they sell within their territories. If you're a French company, only will you sell in France.

We, of course, have logged global sales for our companies. So we wanted to allow them to write off things beyond the U.S. And the WTO essentially said, no.

TANCREDO: They said no. But I'm saying that really, to equal the playing field, then the WTO is going to have to look at their territorial tax system to...

CAVUTO: But that's not going to happen, right? So in the meantime...

TANCREDO: Probably not.

CAVUTO: In the meantime, then the WTO says do this. We say, no, we are not necessarily going to do this. And I envision a trade war, or am I...

TANCREDO: Who knows what it's going to come to. The Congress will wait to see what the president proposes as a result of this. But you know what will happen. I'll put it this way, this will not help efforts to get trade promotion authority passed in the Senate.

CAVUTO: So why would that be a big deal? In other words, trade could get stymied between everybody.

TANCREDO: That's exactly right.

CAVUTO: Again, Congressman, you're saying trade could get stymied because, you know, a lot of U.S. companies utterly agree very wholeheartedly with you, but that they're afraid that we get sanctions, we get trade wars, we get disaster for an economy globally that is already reeling.

TANCREDO: Well, of course, I know the scenario that they lay out. But you want to know what the bottom line is and I think we have to kind of think about this throughout the process of negotiation. The United States can do without the EU a heck of a lot better and easier than they can do without us.

CAVUTO: Do you really think so?

TANCREDO: I really think so.

CAVUTO: So you're saying to the Europeans, play our game or we leave your game.

TANCREDO: No, no. I'm saying play a fair game. That's all. Play a fair game. Stop hometowning us in these arbitration disputes, allow for reform in your own process so that we can make sure that there is a fair analysis of the issues and stop your own practices that you're condemning us for. Just do it in a fair manner and I've got no problems.

CAVUTO: OK. Congressman, thank you so much for coming on. Appreciate it.

TANCREDO: It's my pleasure.

CAVUTO: Representative Thomas Tancredo joining us in Washington.

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