Japan, Mexico Prepare to Follow EU, Canada Sanctions on U.S.
April 1 (Bloomberg) -- Japan and Mexico are preparing to follow the European Union and Canada in imposing extra import duties on U.S. goods after Congress failed to repeal a law that has handed companies such as Timken Co. more than $1 billion in tariffs paid by their competitors.
The Byrd Amendment, first ruled illegal by the World Trade Organization in September 2002, was introduced in 2000 to compensate U.S. industries hurt by foreign goods ``dumped'' at below-market prices. It prompted complaints by a record number of countries at the 10-year-old WTO.
Unless Congress repeals the law, the case may become the most damaging ever at the WTO when the U.S. begins distributing tariffs collected on Canadian lumber, worth $4 billion a year. Japan, the economy most affected by the Byrd Amendment, has the right to impose customs duties worth 125 billion yen ($116 million), the biggest sanctions awarded to Japan in a dispute.
``We have not yet decided when our retaliation measures will be invoked,'' said Kunihiko Kawazu, first counselor at Japan's mission to the WTO in Geneva. ``We have already been authorized to do so at any time, but we will make a judgment taking into account how the discussion in Congress goes on repealing the Byrd Amendment.''
The EU and Canada said yesterday they will impose an extra 15 percent duty on a combined $40 million worth of U.S. imports, including some types of American stationery, clothing, live swine, cigarettes and oysters, beginning May 1.
Choosing Targets
Mexico is deciding which U.S. products will be targeted, said Fernando de Mateo, the country's ambassador to the WTO.
``We're analyzing with what we're going to retaliate,'' he said. ``The problem is not revenge; the problem is you cannot have your cake and eat it. This amendment provides an incentive for producers to say `my neighbor is hurting me.'''
Mexican President Vicente Fox will decide when to apply the sanctions, de Mateo said, adding that he was uncertain about the timing of any decision.
``Japan will move slowly, but ultimately it will move,'' said Lewis Leibowitz, a trade attorney with Hogan & Hartson LLP in Washington and legal counsel to Consuming Industries Trade Action Coalition, an organization lobbying for the Byrd Amendment's repeal that counts Caterpillar Inc., Procter & Gamble Co., Emerson Electric Co. and Nissan North America Inc. among its members.
``Retaliation alone is not going to do this,'' he said. ``If the softwood lumber duties start to get distributed, then retaliation would be huge, but while that's a good reason to repeal, the better reason is that it's a bad law.''
`Dislocations'
The law hurts the U.S. economy by creating ``dislocations'' and it acts as an incentive both to file cases at the WTO and to keep sanctions in place, Leibowitz said. U.S. President George W. Bush called for a repeal of the Byrd Amendment in his budget proposal to Congress on Feb. 7, saying that ending the law could save the U.S. Treasury $1.6 billion in the next fiscal year.
``Retaliation heightens the visibility of the law in Congress,'' says Steve Alexander, CITAC's executive director. ``Imposing retaliation gives credibility to the idea that the law is having a negative impact on the U.S. economy.''
The WTO gave the EU, Canada, Brazil, Japan, India, South Korea and Mexico the right to retaliate against the U.S. law on Nov. 27. Chile won the right to strike back on Dec. 17.
Double Punishment
In their complaints, the governments said the 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. After the U.S. missed an end-2003 deadline for compliance, the WTO authorized governments to impose retaliatory duties on U.S. goods equal to 72 percent of the total paid by their companies.
The 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. fights European resistance to new gene-engineered crops.
U.S. makers of steel, ball bearings, honey and candles are the main beneficiaries of the Byrd Amendment. 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 has said.
And what does this say? That the world is trying to tell the US how it will conduct its world trade, what prices will be paid, and what access they can have to our markets??
I guess it gets down to who is trying to blackmail who -- the world depends on the economy of the US to sell much of its goods -- yet they think they can tell us how we are going to operate, what they can do to us, etc.
IMHO, the WTO was a bad idea to begin with.