[Congressional Record (Bound Edition), Volume 149 (2003), Part 7]
[Extensions of Remarks]
[Pages 9804-9805]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       JOB PROTECTION ACT OF 2003

                                 ______
                                 

                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                         Friday, April 11, 2003

  Mr. CRANE. Mr. Speaker, I am very pleased to introduce the Jobs 
Protection Act of 2003, legislation which will respond to a recent 
World Trade Organization ruling that held that our export-related tax 
benefit, the FSC/ETI provision in our tax code, violates our trade 
agreements. It is my distinct pleasure to be joined in this effort by 
my good friends Charles Rangel and Don Manzullo.
  This legislation achieves two goals: it brings the United States into 
compliance with the WTO, and it keeps the playing field level for our 
manufacturers, which will keep jobs here. I'd like to address each of 
those issues.
  As Chairman of the Trade Subcommittee, I have a strong interest in 
preserving and promoting free trade throughout the world. Trade is 
fundamental to our relations with other nations, and free trade has 
been the greatest civilizing force throughout modern history. I have 
fought ardently for many years to ensure that the United States, which 
is the largest exporter in the world, maintains its rightful role as 
world leader when it comes to trade.

[[Page 9805]]

  Like my colleagues who have joined me in introducing this 
legislation, I believe that we must comply with our international 
agreements. To do otherwise could precipitate a trade war, which would 
be an unacceptable result. Therefore, this legislation repeals FSC/ETI 
and brings the United States into compliance with our WTO obligations.
  The issue, then, is how to best replace FSC/ETI. In recognition of 
the fact that the repeal of FSC/ETI raises the tax burden of current 
beneficiaries by at least $50 billion over ten years, this legislation 
returns that money to the U.S. manufacturers. In order to understand 
why that is so crucial to protecting our job base, it is important to 
understand why the FSC/ETI benefit exists in the first place.
  U.S. corporations that export manufactured goods pay a 35 percent 
corporate tax rate on their profits. In addition, the corporation pays 
an additional value added tax when they it sells its products in 
Europe. However, European manufacturers get a portion of their VAT 
rebated. FSC/ETI compensates manufacturers for this double taxation, 
thus leveling the playing field between U.S. and European 
manufacturers. That means jobs stay here. Were this benefit to be 
repealed with no replacement, U.S. jobs and wealth would be 
artificially transferred to Europe. This is another unacceptable 
result.
  Therefore, the Job Protection Act of 2003 provides a permanent new 
deduction, which is an effective rate reduction for U.S. manufacturers, 
that is consistent with our trade agreements. It is structured in such 
a manner as to preserve and strengthen U.S. jobs. Surely, Mr. Speaker, 
that is a goal we should all support!
  Mr. Speaker, I would like to be clear as to the process we should 
follow as we debate how best to replace FSC/ETI. We have faced 
challenges to export-related benefits in years past. As in the past, it 
is my fervent belief that our common goal must be to protect the 
interests of the United States, not our foreign competitors. While I 
expect a great deal of vigorous debate as we seek to comply with our 
WTO obligations, I remain hopeful that we will resolve any differences 
in a dignified manner, not giving our opponents the benefit of a public 
spectacle.
  A summary of the provisions of the legislation follows.

 The Job Protection Act of 2003--Strengthening U.S. Manufacturing and 
          Addressing the WTO Challenge to FSC/ETI (April 2003)


                           repeal of fsc/eti

       The Job Protection Act of 2003 (the ``proposal'') would 
     repeal the current-law FSC/ETI benefit effective for 
     transactions after the date of enactment.
       Transition relief: The proposal would provide two types of 
     transition relief--
       (1) Binding Contracts: The proposal would not affect 
     transactions pursuant to binding contracts in effect on the 
     date of introduction of the legislation. This provision 
     ensures that pre-existing arrangements of U.S. taxpayers are 
     not retroactively penalized merely because of the WTO ruling.
       (2) General Transition Relief: The proposal also would 
     provide general transition relief based on the company's 
     average FSC/ETI benefit during 2001. A company would receive 
     a deduction for 100 percent of its base period amount 
     (indexed for inflation) for 2004 and 2005, 75 percent for 
     2006 and 2007, and 50 percent for 2008 (no general transition 
     relief thereafter). A permanent benefit for production 
     activities in the U.S., described below, would begin to 
     phase-in as the general transition relief phases out. The 
     general transition relief is not contingent upon future 
     exports and, therefore, is WTO compliant.


         permanent benefit for manufacturing activities in u.s

       Strengthening U.S. Manufacturing: The proposal would 
     provide a permanent new deduction which reduces the effective 
     corporate tax rate that would apply to so much of the 
     company's taxable income as is attributable to ``U.S. 
     production activities''. U.S. production activities would be 
     defined as the manufacture, production, growth, or extraction 
     of property eligible for the current FSC/ETI benefit whether 
     or not actually exported.
       Calculating U.S. Production: The portion of the taxable 
     income attributable to U.S. production activities would be 
     calculated by computing total gross receipts from sale, 
     rental or license of eligible property produced in whole or 
     part by the taxpayer in the United States, and then 
     subtracting from those gross receipts inventory costs, 
     directly allocable deductions, and a pro rata portion of 
     other deductions. Allocation would be done in a manner 
     similar to the method used in allocating deductions between 
     U.S. and foreign source income.
       Corporate Tax Rate Reduction: For companies with 100 
     percent domestic production, the effective rate reduction 
     would be 3\1/2\ points (35 percent corporate tax rate reduced 
     to 31\1/2\ percent) once fully phased-in. Other companies 
     would receive a sliding-scale effective rate reduction based 
     on the value of their U.S. production of eligible products 
     compared to the value of their worldwide production.
     revenue neutral
       The bill has been structured to be roughly revenue neutral 
     year-by-year and over the 10-year budget period. The proposal 
     does not include any extraneous revenue offsets.

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