Posted on 06/06/2003 7:38:25 PM PDT by certify
Trade tax bill gains support in U.S. House
WASHINGTON (Reuters) - A bill that aims to avert a damaging trade war with the European Union over U.S. tax breaks for exporters but still give some tax advantages to American manufacturers is gaining support in the House , sponsors said Wednesday.
The bill would repeal a system of tax breaks for U.S. exporters that the World Trade Organization has said violates international trade rules. The WTO has given the EU the green light to slap $4 billion in punitive import tariffs on U.S. goods if Congress fails to repeal the export tax subsidy.
The subsidy provides a major benefit to U.S. exporters like Boeing , Microsoft Corp. and Caterpillar Inc. who argue that U.S. tax laws put them at a competitive disadvantage in global markets. To soften the financial blow U.S. manufacturers, the proposed legislation would lower their tax rate to 31.5 percent from the current 35 percent.
Backers say the proposal would help save American jobs and some 100 House members have signed on to it.
"I'm encouraged by the broad bipartisan support and momentum that continues to build for our bill," said Rep. Phil Crane, an Illinois Republican who sponsored the bill along with Rep. Charles Rangel, a New York Democrat, and Rep. Don Manzullo, an Illinois Republican.
Despite growing support in the House and backing from some big U.S. manufacturers as well as labor unions, the proposed legislation faces a major obstacle: tax writing House Ways and Means Committee Chairman Bill Thomas doesn't like it.
The California Republican said he plans to introduce his own bill that will expand a measure he sponsored last year but was unable to advance out of committee. That bill, backed by U.S. companies with international operations, would have repealed the export subsidy and used the money to provide a range of tax breaks to U.S. firms with overseas business.
Thomas said he expects to unveil his new legislation after his committee deals with Medicare reform legislation, which House Republican leaders hope to pass by the end of the month.
This is just treating a symptom of a much greater problem.
WTO decision hailed as victory (6/03) The Geneva-based World Trade Organization (WTO) has ruled that the United States was wrong in imposing the 27-per-cent duty on Canadian softwood exports. The charge, which cost Canadian lumber producers an estimated $10 billion a year, was placed on lumber exports after the expiration last year of the 1996 Canada/U.S. softwood lumber agreement. U.S. trade officials continue to allege,
however, provincial stumpage fees are lower than market level and so constitute a subsidy to Canada’s forest industry. A decision from the North American Free Trade Agreement (NAFTA) panel on the legality of the duties is expected this summer.
Pettigrew's brief statement announcing Canada's latest win gave few details setting out the exact grounds on which Ottawa won the latest round in a dispute that has flared several times over the past two decades.
Tuesday's WTO decision was supposed to remain confidential for several more weeks but leaks are common in the highly publicized dispute.
While this win is important to Canadian morale, a softwood industry spokesman warned this week that this still won't mark the end of the trade war.
Washington can and likely will appeal Tuesday's latest ruling, Carl Grenier, spokesman for the Free Trade Lumber Council, predicted in a recent interview.
"(Tuesday's) decision will not lead to immediate change at the border, because these decisions are appealable and that could add six to eight months to the process."
Ultimately, a more important decision will be coming this July from the NAFTA dispute resolution body, Grenier added. That decision will have much more weight, especially with the U.S., than any WTO ruling which isn't binding on parties.
Still, a win Tuesday at the WTO would have some influence on the current NAFTA panel studying the dispute, by undermining some of the American industry's case for duties. Washington, under pressure from its powerful lumber lobby, has levied a combined average of 27 per cent in countervailing and anti-dumping duties on Canadian softwood, which is popular with home builders there.
Since the latest dispute broke out at the end of March 2001, the two countries have been trying to negotiate a solution while at the same time mounting legal battles before various trade bodies.
The battle has been costly: Canadian softwood companies have paid as much as $1.5 billion in duties, thousands of jobs have been lost, production has been cut and in some cases, mills have been shut down.
I recall someone (politician) saying there was a provision for us to leave the WTO if most of the decisions started going against us and our interests. Anyone remember anything about this? And how many WTO decisions have been in our favor?
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