*EPF511 05/07/2004
Export Tax Repeal Bill Stalls Again in Wrangle over Amendments
(WTO-approved sanctions mount as Republicans plan another effort to end debate) (780)

By Bruce Odessey
Washington File Staff Writer

Washington -- The U.S. Senate Republican leadership has started moving again to end debate on a bill to repeal export tax breaks that were ruled illegal by the World Trade Organization (WTO) but has not indicated what would happen if the effort fails.

Late May 6 Senator Bill Frist, the Republican leader, told the Senate he intended to file for cloture to limit further debate to 30 hours and block non-germane amendments. Work on the bill stalled again, at least for some days.

By all accounts the underlying bill to repeal the export tax breaks and replace them with a number of other tax breaks and reforms has wide bipartisan support in the Senate.

Because this bill is one of the few non-spending bills viewed as likely to pass Congress this election year, however, senators have pressed to get votes on highly politicized non-germane amendments that are unlikely to get consideration otherwise.

Frist did not indicate, if cloture fails, whether he would put the bill aside again, perhaps ending for the year any chance to pass it. He indicated he was planning a cloture vote May 11.

"Although there is some disagreement about the best approach, I want to bring this to a close," Frist said. If cloture is approved, he said, "we will have amendments in the early part of next week and they will be germane amendments."

At issue are two U.S. laws that the WTO has ruled as illegal export subsidies: the decades-old Foreign Sales Corporation (FSC) and its successor, the Extraterritorial Income Act (ETI).

The WTO authorized the European Union (EU) to impose sanctions for U.S. non-compliance amounting to $4 billion a year. The EU began March 1 imposing tariffs of 5 percent and is prepared to increase the level by one percentage point a month up to 17 percent -- the rate went up to 7 percent May 1.

The immediate obstacle to continuing work on the bill was the insistence of Senator Maria Cantwell for a vote on an amendment to extend unemployment insurance, which expired in December, through November 30. Democrat Cantwell represents Washington state, which suffers from higher than average unemployment.

Frist indicated he might allow a vote on the Cantwell amendment before the cloture vote.

Twice before Senate Republicans failed to invoke cloture on the bill, which requires votes from 60 of the 100 senators.

After the failures to invoke cloture, the Senate voted May 4 for an amendment, anathema to the Bush administration, aimed at blocking implementation of a Labor Department regulation Democrats argued would eliminate overtime protection for many workers. Five Republicans voted with most Democrats to pass that amendment 52-47.

Other amendments introduced by Democrats were defeated. One would have extended trade adjustment assistance to service workers who lose their jobs as a result of imports.

Another would have placed restrictions on a provision of the bill that would reduce for one year the U.S. tax on income repatriated to the United States from foreign subsidiaries of U.S. companies.

Another would have deleted proposed manufacturing tax cuts and used the money for tax credits aimed at companies creating new U.S. jobs or keeping existing jobs in the United States.

Debate on the Senate bill began early in March, but twice Republican leaders yanked it from the floor after cloture votes failed. Its main provision would over three years repeal FSC/ETI and reduce the tax rate for all U.S.-based manufacturing companies -- not just for certain exporting companies and not for offshore manufacturing -- to 32 percent from 35 percent.

Other provisions would make major reforms to the U.S. international tax regime, including ending double taxation of income and shutting down offshore tax shelters. It also would close abused loopholes in the tax regime, in line with Treasury Department recommendations, including some infrastructure-leasing deals widely regarded as scams.

Democrats are seeking votes on other controversial amendments. One would prohibit foreign subsidiaries of U.S. companies from operating in countries listed as terrorist states -- viewed as aimed especially at Halliburton, Vice President Cheney's former company.

Meanwhile, a rival FSC/ETI repeal bill remains stalled in the House of Representatives. Representative Bill Thomas, Republican chairman of the House Ways and Means Committee, told reporters he was considering a move to get House passage for a package of some trade bills, including free trade agreements with Australia and Morocco and extension of the African Growth and Opportunity Act -- but not an FSC/ETI bill.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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