AWPA Wireline - October 2004

The World Trade Organization (WTO) had been raising tariffs on a wide group of US exports by a percentage point a month since last spring. The only way to do away with the trade penalty was for Congress to repeal the tax cuts for exporters that the WTO had deemed unfair. So Congress ended up enacting a bill (HR 4520) that not only eliminates the tax breaks that were objectionable to the WTO, but also gives a wide range of tax breaks to what lawmakers define as a "manufacturer." It provides $138 billion of tax relief over 10 years to US businesses, including a $77 billion tax break for US manufacturers.

Following the President's signature of this bill, EU Trade Commissioner Pascal Lamy announced that the EU Commission will recommend lifting current sanctions on some 1,600 exports effective January 1, 2005.

...But Then There's Byrd

The World Trade Organization (WTO) appellate body has authorized countermeasures of $78 million against US exports because the US has failed to repeal the Byrd Amendment which was ruled illegal in January 2003. Under the 2003 ruling, the US Congress was obligated to repeal the amendment by December 27, 2003, but missed the deadline. As a result, eight countries (Japan, the EU, Canada, Korea, Brazil, Mexico, India and Chile) filed a request with the WTO in January for authorization to take countermeasures against the US.

Senate supporters of the law rejected the notion that the law should be altered, despite this ruling and the threat from our trading partners to impose up to $150 million in retaliatory sanctions against US exports. In a letter sent to President Bush, Sens. Mike DeWine (R-OH), Robert Byrd (D-WV) and four other senators said congressional support ran high for the law.

Retaliation though is not imminent. European Trade Commissioner Pascal Lamy indicated that retaliation is not desirable and that the EU would much prefer the repeal of the law. The Japanese METI Minister issued a similar statement. "The US could come into compliance with the WTO decision either by repealing the law or by passing legislation that would redirect duties collected in antidumping and countervailing duty cases away from petitioning industries to communities negatively impacted by trade," stated Petros Sourmelis, head of the trade section at the European Commission.

While adoption of sanctions by the EU is a last resort, sanctions will be unavoidable if compliance by the US is not forthcoming soon, Sourmelis added. The EU would have the list of US products that could be hit by sanctions ready by the end of the year.