Up in Smoke?
House tobacco buyout vote could imperil a fix for US WTO violations
WASHINGTON, DC - 07/16/04 - A vote in the House of Representatives to block buyout payments to tobacco farmers could affect eventual passage of a separate corporate tax bill that would eliminate US export tax breaks ruled illegal by the World Trade Organization (WTO).
The proposed buyout of tobacco farmers was included in a measure approved by the House June 17 to overhaul the corporate tax code and place the US in compliance with WTO rules.
The buyout, which garnered much-needed support from "tobacco-state" legislators, authorized $9.6 billion for tobacco farmers in exchange for ending existing government price supports.
But in a July 13 voice vote during consideration of a separate agriculture-spending bill, the House approved an amendment that would prevent the US Department of Agriculture (USDA) from using any of its funds for the tobacco buyout.
"There's never a good time to spend $10 billion bailing out the tobacco industry, but in the midst of a war, a deficit, and an economic recovery, this is the worst time," said Rep. Jeff Flake, the Arizona Republican who sponsored the amendment.
The House later passed the $83.7 billion agriculture bill, 389-31.
The measure would provide funding for most operations of USDA and the Food and Drug Administration (FDA) for fiscal year 2005, which begins October 1.
The House vote was one of several steps that must be taken in the legislative process. For a bill to become law the House and Senate must approve identical versions of the legislation and then send it to the president for his signature or veto.
Congressional aides told reporters they believed the amendment to ban funding for the tobacco buyout would likely be dropped when House and Senate negotiators meet to reconcile their differences on agriculture spending.
However, the tobacco buyout itself will still be up for discussion during House-Senate negotiations on the corporate tax measure. The Senate's version of the tax overhaul passed May 11 does not include a tobacco buyout.
Some senators have warned that they will approve the buyout only if it is factored-in with new federal regulations of tobacco products by the FDA.
The tax bill would repeal a US law giving tax breaks to certain exports; the WTO has ruled against the law, the Extraterritorial Income Act (ETI), as amounting to illegal export subsidies.
The ETI is successor to the decades-old Foreign Sales Corporation, which was also ruled a WTO violation.
After four years of repeated European Union challenges to the US export tax breaks, the WTO authorized the EU to impose sanctions for US non-compliance amounting to $4 billion a year.
The EU began March 1 imposing tariffs of 5% and is prepared to increase the level by one percentage point a month up to 17%.
The rate went up to 9% July 1.
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