CANBERRA The Federal Government will remove tariffs on a wide range of consumer products from microwave ovens to skis and condoms under a deal with the US yesterday to end the long-running Howe Leather dispute. The deal, announced by Trade Minister Mark Vaile, could reduce prices of the 30 items affected by up to 5per cent from July 1, cancelling out the price rises from the GST. All of them are products for which there is no known manufacturer in Australia. The deal is part of an unusual package negotiated between Australian and US trade officials to reduce the penalty facing the Melbourne-based leather manufacturer after a World Trade Organisation ruling that it had received illegal export subsidies. Last year Australia's imports of the 30 items totalled $630million as valued on the wharves, with US exports accounting for more than 20per cent of that. The government decided to remove the tariffs, which have no value to Australian industry, to help settle a dispute that was threatening to swell into a trans-Pacific trade war. The Clinton administration had threatened to impose punitive tariffs on Australian exports of wine, beef, car parts and other unrelated goods unless Australia required Howe Leather to repay $30million of government grants the WTO had declared illegal. But under Australian law, the government has no power to do so, and the company's directors are required to act in the interests of shareholders. Yesterday Mr Vaile and Industry Minister Senator Nick Minchin said they hoped two rival US manufacturers would end the long "harassment" of Howe. Under the deal: * Howe Leather will be required to repay $7.2million over 12 years. * Automotive leather will be ineligible for grants under government industry schemes. * Tariffs on microwaves and the other items will be suspended for 12 years. Mr Vaile said the deal ended the threat of US retaliation against hundreds of millions of dollars of Australian exports, and guaranteed the jobs of Howe Leather's 700 workers. But he attacked the US for having "pursued this globally successful Australian company, while at the same time handing out billions of dollars in assistance to its own agricultural producers". The dispute began in 1995 when Howe Leather won a $US75million ($A124.5 million) contract to supply leather for car seats used by General Motors in the US. As more contracts followed, the two companies that previously dominated the US market then got the US Government to launch a WTO challenge to the industry programs by which Howe was rewarded for increased sales, arguing they amounted to export subsidies, illegal for manufacturing under WTO rules. Tariff free * microwave ovens * skis * home glassware * pruning knives * outboard motors * food mixers * hair clippers * condoms * digital tape recorders * video projectors * vacuum flasks
CAPTION(S):Photo: Happy: Howe Leather employees John Sakulas, Tanya Petrovski, Tom Hooper and William Redenbach. Picture: MICHAEL CLAYTON-JONES
TIM COLEBATCH, ECONOMICS EDITOR
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