* Anti-dumping duty extension 2 years instead of normal 5
* EU majority oppose tariffs, but shoemakers back them
* EU retailers, global manufacturers oppose shoe taxes
(Recasts with details and background)
By Darren Ennis
NEW YORK, Sept 28 (Reuters) - The European Commission is set to propose next month extending anti-dumping duties on imports of Chinese-made shoes, dividing EU member states and reigniting fears of tit-for-tat trade disputes around the world.
After a 12-month probe the EU's executive, which oversees trade policy for the bloc, is expected to propose keeping duties on Chinese shoes, but for for two years instead of the normal five, diplomatic and industry sources told Reuters.
In a compromise aimed at averting a "shoe war" and further damaging already brittle trade ties with the Asian powerhouse, the Commission is also likely to exempt children's footwear and sports shoes from the duties, the sources with knowledge of the proposal said.
It will put the proposal to its 27 member states on Oct. 22.
The European Union first imposed duties, of up to 16.5 percent on Chinese shoes and 10 percent on those made in Vietnam, for two years in 2006 after EU manufacturers accused the two governments of unfairly subsidising their low-cost shoe makers so that EU producers could not compete. Brussels temporarily reimposed the tariffs last October pending a review, despite opposition from the majority of member states and the threat of legal action by Beijing at the World Trade Organisation.
Vietnamese-made shoes are likely to be excluded from the two-year duty extension, the sources said.
"The Commission will say that the data they have collected show no negative impact of the additional taxes on European importers or consumers from the duties and therefore have no legal reason to lift them," an EU diplomat said.
"But they are conscious most governments want the tariffs lifted and are well aware of the political sensitivities of the case, given the pledge by world leaders to avoid protectionist tendencies."
SEEKING COMPROMISE
"They are deperately trying to find a compromise that addresses the concerns of all sides," the diplomat added.
Austria, Belgium, Britain, the Czech Republic, Cyprus, Denmark, Estonia, Finland, Germany, Ireland, Latvia, Luxembourg, Malta, the Netherlands and Sweden still want the duties scrapped immediately, before the lucrative Christmas retail period, an EU diplomat said.
But major shoe-producing members Italy, Spain, France and Poland want to keep the duties.
The EU regularly splits over dumping cases between members supporting freer trade and those worried about cheap competition undermining their own manufacturers.
The G20 group of rich and developing countries reiterated a pledge on Friday to avoid protectionist measures to shield their economies from the worst global recession since World War Two amid growing concern that some countries, notably the United States and China, could become embroiled in a trade war.
Washington's decision earlier this month to restrict imports of tyres from China raised fears of retaliatory trade measures by nations around the world.
"This is Europe's Chinese tyre test," a senior EU official said on the sidelines of last week's G20 summit in Pittsburgh.
So-called "definitive duties" last for five years, but given the sensitivity of the case, Brussels will propose a compromise of two years, which needs the approval of the majority of EU governments to come into force on Jan. 3 next year.
Global shoemakers, led by sports shoe producers such as Adidas, Nike and Puma want the "shoe taxes" to be scrapped, given the gloomy economic situation.
"In Pittsburgh, G20 leaders, including the European Commission, pledged to reject protectionism, so complete termination of the measures, as demanded by a majority of member states, would send a signal that the EU sticks to its promises," Karl Sedlmeyer, vice-president of the Federation of European Sporting Goods Industry (FESI) told Reuters.
Major retailers such as Metro and Marks & Spencer, hit by dwindling consumer spending in Europe, also want the tariffs scrapped.
"We are struggling to see how taxing consumers at the height of a recession could be considered a good idea," said Alisdair Gray of the British Retail Consortium. (Editing by Dale Hudson and Tim Pearce)