APPAREL A PAWN IN EU, U.S. DISPUTE

Byline: Joanna Ramey

WASHINGTON — The European Union is still waiting for a “roadmap” from the U.S. about how a U.S. corporate tax subsidy will be changed, an outline that could cool EU threats to retaliate with punitive tariffs on U.S. exports, including apparel, an EU official said here Friday.
Petros Sourmelis, head of the trade section at the European Commission in Washington, said that the date when the EU could start retaliating — April 29 — is looming and “we have not seen the roadmap.” The EC is the executive body of the EU.
The House Ways and Means Committee is in the midst of rewriting legislation to bring U.S. tax laws in line with World Trade Organization rules. Last year, the WTO sided with the EU in determining that a U.S. tax break, already revised to try to meet WTO objections, is an illegal subsidy for U.S. corporations abroad.
As a sign of good will, the EU now wants the U.S. to detail how the law can be finally changed to meet objections.
“This is not a world premiere in terms of trying to change a piece of legislation,” said an EC spokesman, reinforcing Sourmelis’ comments. “I think we’ve been more than patient.”
Ways and Means chairman Bill Thomas (R., Calif.) said the committee, where tax-law changes originate, is working on the issue. The committee has had one hearing to discuss matters, and a subcommittee has a hearing scheduled this week.
“We have to change,” said Thomas, who has asked for EU patience as Congress wrangles over “fairly fundamentally” changing tax law in an election year. Thomas also said he expects “a bit of diplomatic saber rattling” by the EU on the issue.
Meanwhile, the EU is deploying a U.S. election-year strategy in drawing up another list of U.S. products it wants to retaliate against because of the Bush administration’s recent imposition of punitive tariffs on steel imports. That list will be submitted to the WTO by May 20. The WTO is weighing an EU challenge of the U.S. steel tariffs, a decision that may not come until next year.
Sourmelis said the list will reflect, in part, a strategy to target products made in U.S. states that are Republican battlegrounds in the upcoming November elections. Several districts in apparel and textile-producing Southern states represented by Republican House members are facing challenges. A variety of U.S. apparel and textile exports to the EU, from cotton fabric to jeans to denim fabric, are subject to possible retaliation.
“The process is to convince the U.S. to remove these [steel] measures,” Sourmelis said.

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