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EU, Canada Impose Duties on U.S. Goods to Protest Law (Update6)
March 31 (Bloomberg) -- The European Union and Canada will impose duties on U.S. imports to retaliate against a law that has handed companies including Timken Co. and U.S. Steel Corp. more than $1 billion in tariffs collected from foreign rivals.
The Byrd Amendment, ruled illegal by the World Trade Organization, is designed to compensate U.S. industries hurt by foreign goods ``dumped'' at below-market prices. President George W. Bush has said the U.S. plans to abide by the WTO judgment.
The EU will impose an extra 15 percent duty on some types of paper, clothing and machinery on May 1 after ``the continuing failure of the U.S. to bring its legislation into conformity with its international obligations,'' the European Commission, the EU's executive arm, said today in a statement in Brussels.
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., the EU challenges tax breaks for U.S. exporters worth $4 billion a year and the U.S. is fighting European resistance to new gene-engineered crops.
In his budget proposal to the U.S. Congress on Feb. 7, Bush called for repeal of the Byrd amendment 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 will impose a 15 percent surtax on U.S. live swine, cigarettes, oysters, and some fish beginning May 1, according to a Trade Ministry statement. The surtaxes combined will total C$14 million ($11.6 million) this year, it said.
``For the last four years, Canada and a number of other countries have repeatedly urged the United States to repeal the Byrd Amendment,'' Trade Minister Jim Peterson said in the statement. ``Retaliation is not our preferred option, but it is a necessary action.''
U.S. makers of steel, ball bearings, honey and candles are the main beneficiaries of the Byrd Amendment, in force since 2000. Total payouts to the U.S. companies would rise as high as $1.6 billion this fiscal year unless the law is repealed, the EU says.
``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. The WTO ruled that the governments may impose retaliatory duties on U.S. goods equal to 72 percent of the total paid by their companies.
``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.''
Talks With Congress
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.''
Timken, the biggest U.S. maker of industrial bearings, received $40 million from the U.S. Treasury in 2004, according to a company statement in December. The Canton, Ohio-based company was the top recipient of funds under the program in 2003.
Lancaster Colony Corp., a candle maker in Columbus, Ohio, said it expects to receive $26 million, according to a filing to the Securities and Exchange Commission on Nov. 30.
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 EU understands that Canada will be announcing retaliatory measures against certain products from the U.S. and expects that other co- complainants will soon join it in applying retaliation.''
Last Updated: March 31, 2005 10:21 EST
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