By  on June 8, 2007

WASHINGTON — A bipartisan group of House lawmakers, seeking to give American companies some relief from the adverse impact of globalization, has introduced a bill to eliminate billions of dollars in taxes that most foreign countries impose on U.S. exports.

Reps. Bill Pascrell (D., N.J.), Mike Michaud (D., Maine), Duncan Hunter (R., Calif.) and Walter Jones (R., N.C.) proposed the Border Tax Equity Act, which they said would strengthen domestic production by eliminating an "unfair tax burden" levied on U.S. exports and services. The bill directs the U.S. trade representative to negotiate a remedy through the World Trade Organization for U.S. firms that face a value-added tax assessment when they export products to countries that assess the taxes.

If U.S. trade negotiators fail to reach a remedy by January 2009, the bill directs the government to assess offsetting taxes on imports of goods and services equal to the amount of tax rebates exporters in those countries receive when they ship products to the U.S. In addition, the federal government would issue rebates equal to the amount of value-added taxes paid by U.S. exporters to foreign countries.

"Differential treatment of direct and indirect taxes under international trade rules puts U.S. producers at a profound disadvantage," Jones said at a press conference Thursday on Capitol Hill.

"This bill, if nothing else, will accomplish an education component for Congress and for the general public as to the inherent unfairness of the international trade structure," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

Importers contend that the bill takes the wrong approach in addressing differences in tax systems around the globe and the correct approach would be to overhaul the U.S. tax system.

Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said the legislation would be a "recipe for disaster" because if the U.S. imposes offsetting tariffs on imports from countries that assess value-added taxes, it would most likely lead to a WTO dispute and potentially billions of dollars in sanctions levied on U.S. manufacturers.

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