A Senate bill to lower taxes on manufacturers and end a trade fight with the European Union faltered yesterday as Republicans and Democrats pitched into a broader election-year battle over the economy.
Republican and Democratic leadership struggled to work out a compromise but a vote on the bill is unlikely at least until after Easter recess.
In the meantime, U.S. manufacturers face rising barriers to their exports to Europe.
The World Trade Organization in 2002 ruled against U.S. export subsidies, written into corporate tax rules, and allowed the European Union to slap sanctions on American exports. The sanctions, targeted at hundreds of products, started March 1 and increase each month.
“This bill, and the American manufacturing sector are being held hostage — held hostage to Democratic demands to load this bipartisan legislation with a bunch of unrelated amendments,” Sen. Charles E. Grassley, Iowa Republican, said yesterday on the Senate floor.
Democrats insisted their proposed amendments, dealing with broader economic issues, were relevant to the tax bill. Senate Minority Leader Tom Daschle of South Dakota said that Democrats already had compromised on the number of amendments and that Republicans were “posturing.”
Proposed amendments include measures that would prevent any rollback of overtime pay in new federal regulations and the extension of unemployment insurance.
Republican leadership twice has tried to block consideration of Democratic amendments to the trade bill, but both times fell short of the 60-vote tally necessary to end debate.
“We’re continuing to work with Democrats to reach an agreement on amendments. We are hopeful,” said Nick Smith, a spokesman for Senate Majority Leader Bill Frist, Tennessee Republican.
Mr. Grassley and Sen. Max Baucus, Montana Democrat, wrote tax legislation to repeal the export subsidy, worth about $50 billion over 10 years to firms like Boeing, Caterpillar and Microsoft. The bill would replace it with an across-the-board tax cut for domestic manufacturers, and cut taxes on overseas income for some multinational corporations.
The bill also has been beefed up with other measures aimed at gaining votes, including about $13 billion in tax breaks for energy production.
With no action from Congress, U.S. manufacturers face rising barriers to their products sold in Europe. The EU duties started at 5 percent last month and are rising 1 percentage point per month until Congress rolls back the subsidy. The duties reached 6 percent on April 1. The sanctions are targeted at a wide array of goods, from horses and cheese to carpets and fishing reels.
The European Union won the right to raise the sanctions, pegged at about $19.9 million this month, to $4 billion.
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