Europe
EU, Canada Impose Retaliatory Duties on U.S. Goods (Update10)
March 31 (Bloomberg) -- The European Union and Canada will impose a 15 percent duty on some U.S. imports after the Congress failed to repeal a four-year-old law that has illegally handed companies including Timken Co. and Nucor Corp. more than $1 billion collected from foreign rivals.
The retaliatory tariffs take effect May 1 and will largely affect U.S. paper, clothing and machinery headed to the EU as well as live swine, cigarettes and oysters sent to Canada. The European Commission said in a statement from Brussels that the new tariffs are borne from ``the continuing failure of the U.S. to bring its legislation into conformity with its international obligations.''
At issue is the Byrd Amendment -- a U.S. measure designed to compensate industries hurt by foreign goods -- which was ruled illegal by the World Trade Organization in September 2002. U.S. makers of steel and candles have been the biggest beneficiaries with bearings maker Timken receiving $40 million in fiscal 2004, and candle maker Lancaster Colony Corp. about $26 million.
The new European tariffs, worth about $28 million, add to trans-Atlantic trade tensions as the EU and U.S. battle over aid for aircraft makers Airbus SAS and Boeing Co., tax breaks for U.S. exporters worth $4 billion a year and European resistance to gene- engineered crops.
In his budget proposal to Congress on Feb. 7, Bush called for repeal of the Byrd Amendment -- formally titled the Continued Dumping and Subsidy Offset Act -- and said changing the law could save the U.S. Treasury $1.6 billion in the next fiscal year.
``If Congress has to cave in on the Byrd Amendment, it's more likely to treat it as a gauntlet thrown down and go after something else, like aircraft or GMOs, more aggressively,'' said Phil Evans, trade policy adviser at U.K. Which?, the world's second biggest consumer organization.
Anti-Byrd Coalition
Canada's 15 percent surtax would amount to C$14 million ($11.6 million) combined this year, the Trade Ministry said.
Today's tariff announcement ``is a strong message that we are all sending to the U.S. that international rule, those of the WTO, must be respected,'' Canadian Trade Minister Jim Peterson told reporters in Toronto. ``We just cannot allow the U.S. to illegally disburse funds that are collected.''
In the fiscal year ended Sept. 30, the U.S. Customs Bureau mailed $284 million in checks to about 473 companies seeking to be compensated under the Byrd Amendment, according to the bureau's annual report. As many as 1,900 companies applied.
Total payouts will rise as high as $1.6 billion this fiscal year unless the law is repealed, the EU says. The U.S. Congressional Budget Office last March estimated annual payouts will reach $1.15 billion by 2006 as distributions from tariffs on lumber begin.
``We're disappointed that this step is being taken,'' said Richard Mills, spokesman for the U.S. Trade Representative in an e- mailed statement. ``The U.S. is working to comply with the WTO decision.''
Coordinated Challenge
The complaint against the U.S. law, named after Senator Robert Byrd of West Virginia, rallied the largest coordinated challenge in the history of the 10-year-old WTO.
The Geneva-based WTO gave the EU, Canada, Brazil, Japan, India, South Korea and Mexico the right to retaliate against the U.S. law Nov. 27. Chile also won the right to strike back on Dec. 17. To avoid penalizing European importers, the 25-nation EU is singling out products where the U.S. share of imports into the bloc is 20 percent or less.
In their complaints, the governments said the Byrd law enables the U.S. to punish exporters twice -- first by imposing a duty and then by giving the money collected to the exporter's rivals. After the U.S. missed an end-2003 deadline for compliance, the WTO authorized governments to impose retaliatory duties on U.S. goods equal to 72 percent of the total paid by their companies.
Up to Congress
``The Congress has got to act, we know it's got to act and the Bush administration is doing the best it can to persuade Congress to act,'' said Gary Campkin, head of international trade at the Confederation of British Industry in London. ``The trouble is, business gets caught in the crossfire, and that often means businesses with no direct relevance to the dispute in hand.''
U.S. Trade Representative-nominee, Robert J. Portman, an Ohio Republican, ``is going to be obsessed with Congress until the end of the year and that will have an effect on the U.S. negotiating stance,'' said Adrian Van Den Hoven, an adviser on WTO affairs at Brussels-based European employers federation UNICE, which represents more than 16 million companies, including Unilever NV and Groupe Danone. ``He knows Congress well, but he won't be able to make substantial concessions.''
Spectacles, Sweet Corn
The EU's list of targets includes spectacles, clothing, sweet corn and stationary. A reserve list, that would be targeted if the U.S. distributions increase in value, also covers blankets, hand drills, jerseys and overcoats.
The duties will be formally approved by EU governments in coming days, the commission said.
``The EU and the seven other WTO members are maintaining close cooperation,'' the commission said.
The European Union (EU) and Canada announced they will impose a 15% tariff on some United States (U.S.) imports. Permission for the sanctions was granted by the World Trade Organization (WTO) due to the U.S. maintaining a law known as the Byrd Amendment, which gives its companies billions of dollars collected from foreign rivals.

U.S. Congress failed to repeal the four-year-old Byrd Amendment ruled illegal by the WTO in September 2002. The WTO gave the EU and Canada, in addition to Brazil, Japan, India, South Korea and Mexico the right to impose retaliatory tariffs on November 27. The tariffs will take effect May 1.

The retaliatory tariffs will largely affect U.S. paper, clothing and machinery for the EU and live swine, cigarettes and oysters for Canada.

In the 2004 fiscal year, U.S. based Timken received $40 million, and Lancaster Colony Corp. received about $26 million. The EU says that total payouts will rise as high as $1.6 billion in the fiscal year of 2005 unless the law is repealed. The U.S. Congressional Budget Office estimated that payouts for the fiscal year of 2006 will reach $1.15 billion.

The European tariffs will collect near $26 million, while the Canadian tariffs will amount to near $11.6 million.

The European Commission, in a statement, said the tariffs were caused by "the continuing failure of the U.S. to bring its legislation into conformity with its international obligations."

According to Canadian Trade Minister Jim Peterson, the tariffs are "a strong message that we are all sending to the U.S. that international rule, those of the WTO, must be respected. We just cannot allow the U.S. to illegally disburse funds that are collected."

A spokesman for the U.S. Trade Representative, Richard Mills, said "We're disappointed that this step is being taken. The U.S. is working to comply with the WTO decision."

Other countries such as Japan and Mexico are considering a similar move.

President Bush has called for congress to repeal the Byrd Amendment since February.