UPDATE 1-EU exec plans to extend China shoes tax-sources

* EU Commission plans to keep duties on China shoes -sources

* Two-year extension instead of normal 5-yr term - sources

* Majority of 27 EU states oppose extension of tariffs

NEW YORK, Sept 28 - The European Commission is set to propose next month extending anti-dumping duties on imports of Chinese-made shoes, angering Beijing, most EU governments and reigniting fears of tit-for-tat trade spats around the globe.

The EU's executive -- which oversees trade policy for the 27-nation bloc -- is expected to propose maintaining duties on Chinese shoes for two years instead of the normal five-year term as part of a compromise to be put to EU member states on Oct. 22, diplomatic and industry sources told Reuters.

In a bid to avert a so-called "shoes war" between the major trading partners or worsen already brittle trade relations with China, the Commission is also likely to exempt children's footwear and sports, the sources said.

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.

The action was in response to a complaint by European manufacturers who say they are unable to compete and accuse China and Vietnam of giving unfair subsidies that lower costs.

Brussels temporarily reimposed the tariffs last October pending a review, despite opposition from the majority of 27 member states and the threat of legal action by Beijing at the World Trade Organisation.

Vietnamese-made shoes are likely to be excluded from next month's proposal, the sources said.

NEGATIVE IMPACT

"The Commission will say that the data they have collected shows no negative impact of the additional taxes on European importers or consumers from the duties and therefore (they) 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.

"They are desperately trying to find a compromise that addresses the concerns of all sides," the diplomat added.

The G20 group of rich and developing countries reiterated their pledge on Friday to avoid protectionist measures amid growing concerns some countries, notably the United States and China, could become embroiled in a trade war. [ID:nN25484424]

Washington's decision earlier this month to restrict imports of tyres from China sparked fears the move could lead to retaliatory trade measures by nations around the world. [ID:nN12479076] [ID:nN24455972]

"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 political sensitivity of the case, Brussels is proposing a compromise of two years which needs the approval of the majority of EU governments to come into force on Jan. 3 next year.