U.S. Is Facing Punitive Tariffs
The World Trade Organization on Tuesday authorized an estimated $150 million a year in punitive tariffs on U.S. goods because Congress had failed to eliminate a corporate subsidy the WTO declared illegal two years ago.
The ruling, announced by WTO officials in Geneva, could inflame tensions between the U.S. and some of its biggest trading partners, including Japan and Canada and countries in Europe. Analysts said it was unlikely to lead to a trade war, however.
“It’s a step in that direction, but it’s not as big as some of the other tension-generating cases in the recent past,” said trade economist Gary Hufbauer at the Institute for International Economics, a Washington think tank. “It’s inevitable that the United States will fix it, but it could take a while.”
The WTO ruling involves the Byrd Amendment, named after U.S. Sen. Robert C. Byrd (D-W.Va.). It requires the government to give tariff revenue collected in certain types of trade cases to affected U.S. companies.
For example, the U.S. typically imposes anti-dumping duties if foreign steel companies are found to be selling their products in the U.S. at artificially low prices. Under the Byrd Amendment, instead of depositing those duties into the Treasury, the government distributes the revenue to U.S. steelmakers.
More than $700 million in punitive tariffs have been handed over to companies since the amendment was adopted in 2000. The biggest beneficiaries have been U.S. steel and lumber companies. A variety of other industries also have profited, including shrimp fishing and candle making.
Two years ago, the WTO held that the Byrd Amendment was an illegal corporate subsidy under world trading rules. The U.S. could continue to collect anti-dumping duties, the WTO ruled, but it had to stop distributing the proceeds to private firms.
Bills to change the law to comply with the ruling are pending in Congress, but so far there has been little movement to pass them.
Tuesday’s WTO ruling authorizes countries that challenged the Byrd amendment -- including Japan, Canada, Brazil, South Korea, India, Chile, Mexico and members of the European Union -- to begin imposing punitive tariffs on U.S. exports to those countries. It left it to them to determine which U.S. goods would be targeted.
In Brussels, EU Commissioner Pascal Lamy expressed the hope that Congress would quickly scrap the amendment and indicated EU members hadn’t decided how soon to impose sanctions, according to Reuters News Service.
“Trade defense instruments are a legitimate tool, but they have to follow WTO rules,” Lamy said in a statement.
The EU already has slapped punitive tariffs on U.S. goods in another trade row involving a different tax subsidy for U.S. exporters that also has been ruled illegal by the WTO.
In Washington, a spokesman for U.S. Trade Representative Robert B. Zoellick said the Bush administration would attempt to resolve the latest dispute with the WTO, the 147-nation organization that enforces global trading rules.
“The United States will comply with its WTO obligations, and the administration will work closely with Congress to do so in a way that supports American jobs and American workers,” spokesman Christopher Padilla said in a statement.
Analysts said it appeared unlikely that Congress would act during an election year to repeal the Byrd Amendment, which has considerable support in steel and lumber regions and among economists who believe the WTO has overstepped its bounds.
“In the grand scheme of things, if the United States wants to tough it out on this one it can, and probably should,” said University of Maryland trade economist Peter Morici. “People might not like it, but it’s something the U.S. Congress is entitled to do, and the WTO should stay the heck out of it.”
