AWPA Wireline - March 2004

USTR Ambassador Robert Zoellick issued a letter to 140 other trade ministers urging that the Doha Round be re-engaged in 2004 with a narrowed focus on core market access topics in agriculture, industrial goods and services. Zoellick also called for discussions to achieve an ambitious tariff-cutting formula and integral sectoral negotiations based on defining an approach to critical mass participating in the sectors. He is also visiting many countries to engage in discussions concerning the talks.

The EU's Trade Commissioner, Pascal Lamy, has also been signaling a renewed flexibility on restarting the negotiations and a greater interest in industrial tariff cuts. The EU had been insisting that, as compensation for making agricultural subsidy and trade barrier cuts, it wanted countries to sign on a series of agreements known as the "Singapore Issues" - agreements on competition policy, investment, and transparency in government procurement. Its insistence on these new rules was one of the factors leading to the collapse of the WTO Ministerial meeting in Cancun.

Reports state that the EU is now willing to relax or end this position, and to stress that it seeks more compensation by getting developing countries to reduce their industrial tariffs.

. Strand Being Dumped, ITC Rules

The US International Trade Commission determined that a US industry is materially injured by reason of imports of prestressed concrete steel wire strand from India, Brazil, Korea, Mexico and Thailand. As a result of the Commission's affirmative determination, the US Department of Commerce will issue a countervailing duty order on imports of this product from India and antidumping duty orders on imports from Brazil, India, Korea, Mexico and Thailand.

. EU Objects to US Duties

The European Union took its objections about the way the US calculates antidumping duties to the WTO. The European Commissions said that the US overcharged when it set antidumping duties on 31 different products imported from the EU, including pasta, ball bearings, chemicals and hot-rolled steel. It has asked the WTO to set up a panel to examine the legality of the US policy, which it says affects hundreds of millions of dollars in imports from Europe.

The practice, called zeroing, overestimates the amount of antidumping fines to be paid by importers, the EU contends. Dumping fines are generally calculated by subtracting the price a company sets for its products in a foreign market from the price it charges at home each month.

In zeroing, however, the calculation excludes months when the imports were sold above the home price, the higher price differential is simply counted as zero. The lower prices are then tallied and used to calculate the antidumping duties.

. 1916 Dumping Law

The European Union received the go-ahead to start imposing trade sanctions against the US in a dispute over an 88-year old law that US steel producers and other companies have used to fend off imports. A panel of arbitrators for the World Trade Organization ruled that the EU can start the sanctions in retaliation for the US failure to repeal the 1916 Antidumping Act that was ruled illegal by the WTO almost four years ago.

This WTO ruling involved a 1916 law which helped the US fight foreign competition after the end of the World War I. It had been considered obsolete until Wheeling-Pittsburgh Steel Corporation brought a lawsuit against importers of Russian and Japanese hot-rolled steel in 1998.

The EU has also developed its own sanction, which has been accepted by WTO arbitrators: the EU will implement specific legislation which mirrors the language of the 1916 Act and applies only to products from the US. The EU mirror legislation would entitle companies in the EU to bring complaints against US companies under the same basic conditions as those required under the 1916 Act, i.e., if products from the US are being dumped with an intent to harm an EU industry or to restrict trade in the EU and if damage is being caused to the complainant. The 1916 Act provides for damages to the complainant equivalent to three times the damage suffered, fines up to $5,000 and/or imprisonment up to one year.

. FSC Problem

Starting March 1, a wide range of US exports to Europe, including steel, are now subject to a 5% penalty tariff that will ratchet up by 1 percentage point each month over the next year unless Congress acts to remedy the Foreign Sales Corporation (FSC) issue.

Many in Congress want to target substitute corporate tax breaks to US manufacturers, especially in light of the 3 million factory jobs that the country has lost in the past 3.5 years. Other lawmakers, including House Ways and Means Chairman Bill Thomas (R-CA) want to let US-based companies with overseas factories share in the breaks.

A Thomas-backed bill that passed this committee last fall would have cost $60 billion over 10 years and would have cut taxes not only for US manufacturers, but for many corporations doing business overseas. This measure is opposed by legislation being sponsored by many Democrats, including ranking minority member on the Committee Charles Rangel (D-NY) and several Republicans including Reps. Philip Crane (Chair of the House Trade Subcommittee) and Donald Manzullo (Chair of the House Small Business Committee). Their bill would limit the future tax breaks to US manufacturing operations.

Complicating the matter is a bill being supported by the Republican Chairman of the Senate Finance Committee, Sen. Charles Grassley (R-IA). His approach is similar, yet still different, from the Crane/Rangel bill.

ENVIRONMENTAL

. Rules Decline, But EPA Still Going Strong

While the total number of regulations created by the US Environmental Protection Agency (EPA) declined in recent years, the agency remained among the government's leading rulemakers in terms of the number of regulations developed and their expected economic impact, according to a new CATO Institute study.

The 2002 Federal Register list 409 potential EPA rules that have been recently completed or are anticipated in the next 12 months. That total places EPA third in the number of rules in the regulation pipeline behind only the Transportation and Treasury Departments.

The 409 new rules represent 9.8% of all regulations currently in the federal government's pipeline. Overall, EPA will spend $4.4 billion in fiscal year 2004 to enforce environmental regulations, representing 18% of the government's total budget for enforcement activities.

The report also credits EPA will 25 of the government's most economically significant rules --those that could result in a negative economic impact of $100 million or more.

However, while the EPA remains among the leaders in both the number of new rules created and their economic impact, overall the agency's rulemaking activity has declined over the last five years, from a total of 462 in 1998 to 409 this year. The number of new rules affecting small businesses has dropped from 178 to 167 in the last five years.

Somewhat similar declines in regulations can be seen across much of the federal government. The total number of regulations in the pipeline dropped from 4,699 in 2000 to 4,187 last year. The number of significant rules is also at its lowest level since 1998. Despite these declines, the 2002 Federal Register was the largest ever with 74,528 pages, an increase of about 9% from 2001.

OTHER LEGISLATION

. Steel Caucus Back to Work

Blaming a flawed system for the recent ruling against US steel tariffs, Congressional Steel Caucus Chairman Phil English (R-PA) has introduced a House resolution calling for the immediate reform of the World Trade Organization dispute resolution mechanism.

The Caucus also announced their five priorities for the second session of the 108 th Congress:

TRADE

. Zoellick Pushing Doha