U.S. Seeks to Erase Tariffs on Manufactured Goods by 2015

The Bush administration, searching for a way to jump-start moribund global trade negotiations, announced a bold negotiating proposal Tuesday to eliminate border taxes on manufactured goods by 2015.

The administration said its plan would amount to an $18-billion annual tax cut, the amount that the government collected last year in manufacturing tariffs on everything from automobiles and airplanes to shirts and shoes.

“Our proposal would turn every corner store in America into a duty-free shop for working families,” U.S. Trade Representative Robert Zoellick said. “This historic proposal would benefit the average American family of four with an extra $1,600 a year.”

Seeking to drive home the effect on consumers, the administration invited managers from a suburban Wal-Mart store to pose with two identical shopping baskets full of clothing and other items that currently sell for $202 but could be bought for $170 should the border taxes be eliminated.

The U.S. proposal will be presented next week at a negotiating session of the 144-nation World Trade Organization in Geneva, Switzerland. The WTO has made little progress toward narrowing differences over a new round of global trade talks that were launched late last year in Doha, Qatar.

Deep divisions exist on how best to reduce trade barriers not only on manufactured goods but also on agricultural products and on services.

The U.S. proposal would phase out border taxes on nonagricultural goods in a two-step process. From 2005, when the current Doha round of trade talks is scheduled to be completed, to 2010, all tariffs that are currently at 5% or less would be eliminated, and tariffs higher than this level would have to be lowered to no more than 8%.

In phase two, the 8% tariffs would be lowered in steps each year, starting in 2010 until the tariffs were eliminated by 2015.

Big U.S. manufacturing companies, which have long complained that high tariffs keep their goods out of poor countries, praised the administration proposal as a way to boost U.S. exports.

American companies that have spent years successfully lobbying Congress for protection from imports of such products as clothing, textiles and glassware said the U.S. proposal would result in the loss of more American jobs.

Auggie Tantillo, Washington coordinator of the American Textile Trade Action Coalition, said that American textile and apparel companies have lost 700,000 jobs since 1995 and more than 200 plants have closed in just the last two years.

“The U.S. textile industry is in the worst crisis of its history,” Tantillo said.

He said the administration obviously waited until after the congressional elections to unveil this trade proposal because officials knew “it would not be overly popular in the hinterlands.”

The Zero Tariff Coalition, composed of companies across a broad range of U.S. industry, praised the proposal.