European trade official warns of sanctions if U.S. fails to follow WTO rulings (Secrets Boards)

– The European Union's top trade negotiator said Monday the United States must bring its laws into compliance with global trade rules soon to avoid sanctions of up to $4 billion against American exports. EU Trade

Commissioner Pascal Lamy met Monday with U.S. Trade Representative Robert Zoellick and was to meet over the next two days with top members of Congress to assess how quickly Congress will be able to comply with a World Trade Organization ruling that a tax benefit provided American exporters amounts to an unfair trade subsidy. Last week, the EU put out a revised list of American products that could be subject to punitive tariffs of 100 percent that would be designed to eliminate up to $4 billion in American export sales annually.

The EU tariffs have been cleared by the WTO as acceptable retaliation for U.S. tax rules covering foreign sales corporations that the WTO ruled illegally subsidizes U.S. traders. "Thus far Europe has held off on retaliation," Lamy wrote Monday in a guest column in The Wall Street Journal.

"But without concrete steps toward compliance, that is not a situation which can be maintained for much longer." Asked whether he had set deadlines during his meeting with Zoellick for sanctions to be imposed, Lamy said that he would do that only when "I am sure it will be helpful." Lamy said he understood it is up to Congress to pass legislation to overhaul the export tax break to bring it into compliance with WTO rules.

Advocates for changing the law have used the EU's sanction threat as an argument for why Congress must move quickly. The commissioner said one problem was a growing list of U.S. trade policies that have been found by WTO hearing panels to violate WTO trade rules.

These include the so-called "Byrd amendment" that lets the U.S. government fine foreign companies it judges to be dumping goods in this country and donate the fines to American competitors of the foreign firms; and to a WTO ruling that the United States was in violation of international copyright protections in a case brought by the Irish Music Rights Organization.

"This is not a question of being un-nice or banging on doors that we should not be banging on," Lamy told reporters. "It is just that we care about the system" of regulated global trade. Lamy was to meet with Senate Finance Committee Chairman Charles Grassley, R-Iowa, and House Ways and Means Committee Chairman Bill Thomas, R-Calif. Both chairmen support revamping the trade subsidy law to make it comply with WTO rules, but the battle is expected to be lengthy given the number of American companies that benefit from the old rule. Zoellick, who appeared with Lamy at a joint news conference after their discussions, said he and Lamy both recognized that, at a time of rising diplomatic and political tensions about a possible U.S.-led war against Iraq,

it is important that the United States and its allies seek common ground in other areas such as trade. For his part, Zoellick left open the possibility that the United States could file a WTO case against the EU for its ban on imports of genetically modified food crops from the United States even though U.S.

authorities have judged the crops safe for human consumption. "We are getting to a point where patience is running thin," he said.

"We are at a point where we believe the moratorium needs to be lifted." The administration had been poised to bring a case early this year, but U.S. officials have said the issue has been put on indefinite hold while the United States seeks European support for war with Iraq.

Canada should turn to WTO, NAFTA for softwood settlement: finance minister

By AMY CARMICHAEL

The stalemate of negotiations with the United States on softwood lumber duties leaves Canada with no choice but to pursue a resolution at international trade tribunals, Finance Minister John Manley said Wednesday. (CP /Chuck Stoody)
SURREY, B.C. (CP) - The stalemate of negotiations with the United States on softwood lumber duties leaves Canada with no choice but to pursue a resolution at international trade tribunals, Finance Minister John Manley said Wednesday.

Negotiating a settlement to lift the crippling duties would be ideal, Manley told a group of business leaders in this Vancouver suburb, but Canada won't settle for an unfair deal. "A negotiated settlement is faster, saves on costs and gives certainty," he said. "But we can't give away the store."

Canada has a strong case and will win its challenges at the World Trade Organization and under the North American Free Trade Agreement, Manley said.

Rulings from the WTO and a NAFTA panel on the legality of the U.S. duties are expected around May.

A legal decision in Canada's favour could prompt the United States to be more flexible and strike a negotiated settlement, said Manley. That, he said, is likely the industry's best hope.

"I don't think we can negotiate anything other than from a position of strength," said Manley, who is also deputy prime minister and a possible contender to replace Jean Chretien in the top job.

"We will carry on with our approach, which has been to litigate the issue until we see some flexibility on the U.S. side that could lead to a satisfactory conclusion."

Although the legal process, launched two years ago, is slow Manley said some decisions are expected to be handed down this year, "that should be helpful to us."

The U.S. Department of Commerce imposed duties averaging 27.2 per cent on Canadian softwood lumber last May after complaints from U.S. producers the imported wood was subsidized and sold below production costs.

Canada challenged the duties under NAFTA and WTO rules but the two sides have been trying to negotiate a settlement. Discussions broke off Tuesday over differences about an interim border tax and refunding the $1 billion in duties collected so far, but most participants expect them to resume.

Manley said Canadian lumber companies suffering under the duties are rising to the challenge and teaching the United States a lesson in economics.

"Despite the duties and dislocations in a number of communities especially in B.C., Canadian lumber exports are up," Manley said.

Having to sell into a market under such heavy duties has pushed the Canadian industry to streamline and become more efficient, he said.

"That's going to make them very strong and very competitive for a long time to come. They've forced us to lift weights and we've gotten stronger."

Manley made the remarks at the Surrey Chamber of Commerce where he was promoting the federal budget he delivered last week.

Canadians made it clear they were most concerned about health care and defence funding, which was where much of the money was allocated, he said..

Manley was asked why more money couldn't be found for municipalities to fund infrastructure such as transportation, a major issue in British Columbia as it bids for the 2010 Olympic Games.

Ottawa is doing what it can, he said.

"Our responsibility is not local infrastructure," said Manley. "We can help but we have to look after our jurisdictions."

The budget gives $3 billion over 10 years in funding for strategic and municipal infrastructure programs.

These include the so-called "Byrd amendment" that lets the U.S. government fine foreign companies it judges to be dumping goods in this country and donate the fines to American competitors of the foreign firms . .

For those not familiar with the "Byrd Amendment", you might find the following article interesting. Tariffs are imposed on the foreign companies. Tariffs generally go to the Federal government (as intended by our Founding Fathers). A few weeks ago The Journal reported that an attempt is being made to repeal "The Byrd Amendment". Of course Senator Byrd has vowed to fight the repeal.)

HOST OF COMPANIES POCKET WINDFALLS FROM TARIFF LAW
The Wall Street Journal
By Neil King, Jr., Staff Reporter
December 5, 2002
     NORTH EAST, Md. -- When making Fourth of July sparklers lost its shine, the Elkton Sparkler Co. in 1999 shut its factory here and became an importer of sparklers instead.
     Yet this year, it rehired a skeleton crew, cranked up its old boiler and started making sparklers again. The reason: Elkton wanted to take advantage of an obscure new law that is showering money on certain U.S. manufacturers.
     The law, the Continued Dumping and Subsidy Offset Act of 2000, works like this: Manufacturers that successfully petition the U.S. to impose tariffs on imports they claim are being "dumped" -- or sold for less than fair-market value -- are allowed to keep the proceeds of those tariffs. Elkton and its archrival, Diamond Sparkler Co., had successfully protested cheap Chinese imports in 1991; the U.S. then hit the Chinese makers with import duties.
     The Byrd Amendment, as the new law is known, creates a practice found in no other country, where the proceeds of tariffs generally are placed in the government till and not given out to specific companies. Indeed, that's how it used to work in the U.S.
     To foreign companies and other critics, the Byrd Amendment, named after Sen. Robert Byrd of West Virginia, amounts to a double whammy: The U.S. not only whacks foreign manufacturers with hefty tariffs, but it also rewards their U.S. competitors. So when Elkton started importing, the tariffs it paid helped Diamond get a government check for $1.6 million.
     The law has triggered bureaucratic skirmishes and legal spats unusual even by Washington standards. In Louisiana's Atchafalaya Basin, hundreds of crayfish farmers and processors are vying for a portion of $8 million in duties on Chinese imports. A clutch of U.S. candle makers is clamoring over $65 million collected from Chinese candle companies that must pay 54% duties to get their products into the U.S. Only rarely is the disbursement simple. Maui Pineapple Co., for instance, is the sole candidate to receive this month about $500,000 in duties on imported Thai pineapples. Congressional forecasters figured the Byrd Amendment would dole out $39 million a year. In fact, the Treasury Department will soon cut checks for the latest year totaling nearly $320 million to companies including the J.R. Moon Pencil Co., the Bonanza Crawfish Farm, U.S. Steel Corp. and Gates Rubber Co. On the paying end are companies from Chinese pencil makers to Italian manufacturers of industrial belts.
     Companies for years have sought government protection from imports they say are unfairly subsidized or sold below their fair value. Help, when it comes, usually takes the form of tariffs. California garlic growers in 1994, for instance, won 299% duties on garlic from China. The tariffs are intended to help U.S. companies compete by putting their products on a level playing field with the dumped imports. But until last year all duty collections spilled into the Treasury's general fund.
     Enter Sen. Byrd, a master Washington wheeler-dealer. In the fall of 2000, the veteran lawmaker slipped the Subsidy Offset Act amendment into an agricultural spending bill. Then-President Clinton railed against the amendment but grudgingly signed the bill, which took effect last year.
     Sen. Byrd continues to champion the law. "We should not back away one whit from providing support for American industries, especially in such precarious economic times," he said yesterday in a statement. "If the duties collected were simply poured into the general Treasury, the companies most affected by these harmful unfair trade practices would lose the opportunity to invest in themselves."
Ball-Bearing Bonanza
     The amendment's chief beneficiaries for 2001 were two ball-bearing companies whose lawyers helped to write the legislation, congressional staffers say. Torrington Co., a unit of Ingersoll-Rand Co., Woodcliff Lake, N.J., took in $63 million in Byrd money last year, and Timken Co., Canton, Ohio, fetched $31 million. The two companies also expect to receive the bulk of this year's payout from ball-bearing duties -- an estimated $70 million collected from bearing makers in Japan, the United Kingdom, Romania, Sweden and six other countries. Timken recently agreed to buy Torrington.
     Timken has for decades invested heavily in research and development, a company spokeswoman says. "The Treasury Department payment clearly recognizes just how important such investments are to developing innovative technology."
     The Byrd Amendment authorizes the U.S. Customs Service to disburse the tariff revenues. Dumping duties on, say, canned mushrooms or iron castings pile up in separate accounts. Every year, U.S. companies that can show they supported a dumping case -- and have continuing manufacturing operations -- apply to receive some of that money. The cash is doled out in proportion to each company's claimed expenses, so that large companies typically get bigger slices of the pie.
     Companies are allowed to request reimbursement for nearly all their production expenses, including research, capital and material costs, but not labor. Since the legislation is retroactive, companies can claim expenses dating back to when the protective duties first took effect. Pushing it to the hilt, companies last year put in requests for $1.2 trillion, or about 10% of the U.S. annual gross domestic product. Ball-bearing maker Torrington, which had sales last year of $1.1 billion, sought reimbursements of $23.4 billion.
     "To us this is essentially recovering money that we were entitled to years ago because of predatory international competition," says a spokesman for Torrington parent Ingersoll-Rand.
     The biggest Byrd Amendment beneficiaries aren't the country's steelmakers even though they represent the largest share of the 337 active antidumping and countervailing duty cases. Steel and iron companies last year collected only about $29 million, or 14% of the total. That's because imports on many steel products have declined sharply since tariffs were imposed.
     Instead, the main beneficiaries are companies such as New Jersey pasta maker A. Zerega's Sons Inc., which took in nearly $2.3 million last year from pasta companies in Italy and Turkey. More than a third of all this year's Byrd Amendment money will go to companies selling candles, pasta and crayfish tails, imports of which have remained strong despite their high tariffs.
     Word of the Byrd bonanza seeped out slowly at first. "But it's not a secret anymore," says Jeffrey Laxague, the Byrd program administrator at the Customs Service, who's been swamped by letters and phone calls from companies and their lawyers seeking to qualify for Byrd funds. Nearly 1,200 companies have sought reimbursements this year, a 30% jump from 2001.
     "It's the money that's driving all this," says Mr. Laxague. The single largest blitz of inquiries came this summer from the nation's beekeepers, who had heard -- wrongly -- that a fortune had built up on honey duties from Argentina and China. "It was nothing but beekeepers for days," he says. Honey duties, enacted late last year, won't be ripe for disbursement until 2003.
     U.S. trading partners have blasted the Byrd Amendment as violating international trade rules by unfairly favoring U.S. companies. The World Trade Organization, in a September ruling, agreed. More than a few U.S. companies are of the same mind. "The Byrd Amendment is just bad trade policy," says William Lane, a Washington lobbyist for heavy machinery maker Caterpillar Inc. "It promotes litigation, violates our WTO commitments and undercuts U.S. competitiveness."
     But Congress and President Bush don't appear ready to bend. U.S. Trade Representative Robert Zoellick -- despite his free-trade leanings -- appealed the WTO ruling last month. Sen. Byrd and other influential members of Congress have said they will fight any effort to repeal the law.
     The Byrd law is replete with the sort of ambiguities that keep lawyers busy. Trickiest of all is the requirement that companies show they supported the original case that resulted in dumping duties being enacted. Some of these cases date back to the 1970s and 1980s.
     The fight over who was and wasn't a supporter has been particularly heated in the candle industry, which won stiff import duties on wax candles from China in 1986. The imports kept arriving and the duties piled up. But who should get the proceeds?
     For Jay Urwitz, one of a slew of corporate lawyers in Washington who are working the Byrd account, the answer is simple: Candle Corp. of America, the industry's largest employer. "I think it's only fair that my client get some of the cash," says Mr. Urwitz, of the law firm of Hale & Dorr.
CHECKING THE WRONG BOX
     But Candle Corp.'s claim was rejected by the U.S. International Trade Commission, which has the task of sorting out which companies supported past dumping cases. Candle Corp.'s problem is that it offered only conditional support for the tariffs on a 1985 questionnaire that the ITC distributed to candle makers. Then, in a follow-up questionnaire in 1986, a Candle Corp. official checked the "Don't Support" box. The company, a unit of Blyth Inc., Greenwich, Conn., has appealed the ITC's rejection to the Customs Service.
     The ITC similarly nixed the big Yankee Candle Co. of Massachusetts from a list of qualified recipients. That provoked a heated letter last month from the state's Democratic Sen. John Kerry, who argued that pouring "an enormous infusion of cash into the hand of a minuscule fraction of the industry [would] irrevocably alter the domestic marketplace."
     The ITC also rebuffed a Louisiana purveyor of crayfish and alligator pelts, PS Chez Sidney LLC, saying the company failed to support slapping duties on Chinese crayfish imports in 1996. PS Chez Sidney filed suit against the ITC last month on First Amendment grounds in the U.S. Court of International Trade in New York.
     "This is a free-speech issue," says William Brown, the company's lawyer. "We believe it is unconstitutional to provide government benefits to those who support them and to punish those who don't."
     Companies are eagerly eyeing some new pots of cash that could pay out big. Canadian softwood lumber, as of this year, is subject to import duties averaging 27%. Already the timber kitty holds $570 million and is expected to top $1 billion by next spring. The money could start to flow to U.S. timber companies as soon as next year. Canada is fighting the tariffs at the WTO.
     Elkton, the sparkler importer that nevertheless applied for Byrd money, used to crank out a million sparklers a day in a cluster of squat, concrete-block buildings set amid weeds and rusty trucks at the top of Chesapeake Bay. It still owns the little factory complex, about two miles from its warehouse and offices on the other side of town, but not much happens there nowadays.
     David Shivery, the company's vice president, unlatches a padlock and yanks open the door to a dark chamber he calls the wire-straightening room. "I'm pretty sure that over all those years we made more sparklers than Diamond, and we haven't got a penny of the Byrd money," says Mr. Shivery.
     Coils of sparkler wire lay 10 deep on the floor, but there are no workers to cut and straighten them, and won't be for some time. After the production burst in September, Mr. Shivery figures Elkton may make another batch or two sometime next year.
     "When there's money out there like this, why not take advantage of it?" says brother Charles Shivery, who heads the sparkler business his father founded in 1945.
     At rival Diamond Sparkler, last year's check for $1.6 million "put us in the black for the first time in years," says William Weimer, Diamond's general counsel. One of the last sparkler makers in the U.S., Diamond also expects to get much of this year's estimated $700,000 payout, collected from Chinese producers that pay a 93% duty to ship their goods to the U.S.

(emphasis added)

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.