* EU Commission considers suspending tariffs on 92 products
* Multi-year suspension designed to help manufacturers
* Preliminary list includes pig iron, chemicals, woods
By Juliane von Reppert-Bismarck
BRUSSELS, July 28 (Reuters) - European Union countries are
in a deepening dispute over an Italian proposal to temporarily
drop import tariffs on dozens of raw industrial goods, a move
supposed to help EU manufacturers weather the economic crisis.
The Italian proposal was put to the European Commission, the
EU's executive, several months ago, prompting the Commission to
ask other EU member states for their input.
As a result, the Commission has now compiled a list of 92
products from which tariffs could be cut, sparking a row between
member states who support the move and those who say doing so
would damage their own manufacturing industries.
The Commission's list, seen by Reuters, covers products in
the steel, cosmetics, shoemaking, textile, furniture and
car-manufacturing industries, among others.
Italy, which has a large manufacturing base that imports raw
materials from the likes of China, Brazil and Russia, using them
to produce higher-value goods, estimates savings for EU firms of
2 billion euros ($2.6 bln) a year if the tariffs are cut.
But diplomats say France, Germany and Spain -- three of the
EU's largest economies -- oppose the proposal, which could have
a severe impact on their own manufacturers, who produce many of
the same goods that Italy and others are importing.
Italy is supported by the Czech Republic and also has
backing from free-trade advocates such as Britain, the
Netherlands and Sweden. The proposal would eliminate or at least
sharply reduce tariffs for two to three years.
"This will allow European companies to buy materials at the
same prices as their competitors," said Giancarlo Salemi, a
spokesman for Italy's deputy minister for economic development,
Adolfo Urso.
"In this financial crisis, it will be a help to companies
who need to buy things, and to consumers as well."
TRADE BATTLE
The proposal echoes moves by the U.S. Congress, which this
month voted on a bill proposing tariff cuts on industrial
inputs. Brazil and Canada are considering similar moves.
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Specifically, the Commission list covers chemicals and
mineral ingredients used in food processing, pharmaceuticals,
cosmetics, microchips and packaging; elements used in steel and
car production; sheep, cow, pig, horse and other hides to be
made into leather; dozens of exotic woods, pig iron, aluminium
and 26 types of yarns and fabrics.
Reducing or eliminating tariffs on such products -- which
remains only a possibility at this point -- could raise alarm
bells in developing countries about so-called tariff escalation,
where raw materials enter a country or region at low rates but
higher-value processed goods are subjected to higher tariffs.
It could also lead to retaliatory measures by developing
world exporters as they seek to maintain competitive advantage.
The Commission, which can either reject Italy's proposal or
put forward a proposal of its own, has told EU governments that
a comprehensive deal may not be possible unless member states
can agree compromises themselves, diplomats say.
If a majority of the 27 member states support a
tariff-reduction plan, the Commission could make a proposal this
autumn, which national governments would then vote on.
Italy and other advocates of the cuts are expected to use
the summer to apply what pressure they can on France and Germany
to support the proposals, but it remains far from clear that a
compromise will be reached, meaning a stand-off is likely.
(Editing by Alison Williams)
