WASHINGTON — European Union Trade Commissioner Pascal Lamy could announce as early as today whether a corporate tax bill signed by President Bush on Friday goes far enough for the EU to lift 12 percent tariffs on $4 billion worth of U.S. exports, including apparel, textiles and footwear.
At issue is whether the measure adequately repeals a U.S. export subsidy deemed by the World Trade Organization to be against its fair competition rules.
While the tax measure does repeal the subsidy for multinational corporations, the provision isn’t phased out until the end of 2006. There are also $42.6 billion in new multinational tax breaks. Twice before, the WTO and EU rejected other attempts at repealing and replacing the export subsidy.
A spokeswoman with the European Commission in Washington said a date hadn’t been set for Lamy to decide on the suitability of the tax bill in addressing the export subsidy question. She said Lamy is scheduled to deliver a speech in Brussels today, but didn’t know further details.
After Congress passed the tax bill on Oct. 11, Lamy said he would study the legislation, “in particular regarding transition periods, grandfathering clauses, as well as all other relevant fiscal provisions.”
The EU trade sanctions have been in place since March, when they started at 5 percent, and have increased 1 percent a month. U.S. exports covered by the steep tariffs include $100 million worth of annual apparel shipments, $103 million worth of leather handbags and luggage, $16 million in cosmetics, $19 million in footwear and $500,000 in man-made filaments and cotton.
While Congress repealed the offending export subsidy enjoyed by multinational corporations such as Wal-Mart Stores Inc., it approved almost $137 billion in new corporate tax breaks over 10 years for the largest business tax code overhaul since 1986. More than half the value of the tax breaks goes toward lowering the corporate tax rate to 32 percent from 35 percent for U.S.-based manufacturers, including apparel and textile makers.