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Last Updated: Wednesday, 6 October, 2004, 22:18 GMT 23:18 UK
US Congress agrees new tax breaks
Container port
US goods have been hit by punitive tariffs
The US Congress has agreed in principle a huge corporate tax bill providing tax breaks for manufacturers in return for repealing export subsidies.

The bill could end a long-running dispute with the European Union over $5bn(2.8bn) worth of export subsidies which the WTO has said are illegal.

The EU slapped tariffs of up to 12% on 1,600 US goods in March in response.

In order to win support for the repeal, legislators have offered $130bn in tax breaks for manufacturers.

Unusual beneficiaries

Among those who will benefit from the package will be construction, engineering and shipping industries.

However, tax relief is also being offered for tackle box makers, producers of bows and arrows and fan importers, which has led critics of the bill to claim that it does little to benefit ordinary taxpayers.

Legislators hope the House of Representatives and Senate will both pass the bill before close of business on Friday when the two chambers adjourn ahead of next month Presidential elections.

"There are a lot of things in this bill that are very popular with senators of both parties," said Republican Senator Mitch McConnell.

The bill's provisions include a controversial one year tax relief enabling US multinational firms to repatriate earnings at 5.25% instead of the normal 35% rate.

Critics of the measure, which include Treasury Secretary John Snow, have argued that it will encourage firms to move jobs overseas.

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