Thursday, March 31, 2005

Canada and the European Union said yesterday that they would impose duties on U.S. products to retaliate against a law that has helped American companies pocket more than $1 billion from foreign competitors.

The World Trade Organization said two years ago that the popular U.S. law, known as the Byrd amendment, is illegal.

“Retaliation is not our preferred option, but it is a necessary action. International trade rules must be respected,” said Jim Peterson, Canada’s minister of international trade. It is the first time Canada is retaliating against U.S. products under WTO rules.

The Bush administration has urged Congress to repeal the rule, but lawmakers, especially in the Senate, have resisted.

Named for Sen. Robert C. Byrd, West Virginia Democrat, the law allows U.S. companies to complain that foreign competitors are unfairly selling their products in the United States. If they convince the U.S. government that is the case, duties are slapped on the foreign goods and the revenue is handed over to the firms that brought the complaint.

The bill since 2001 has benefited makers of bearings, steel, food and other goods. For example, the Timken Co., a Canton, Ohio, manufacturer of bearings and steel, in February reported $44.4 million in annual income under the law.

Before the Byrd amendment, those duties were paid into the Treasury. President Bush in his 2006 budget called the measure an “unwarranted subsidy” and proposed eliminating the benefit, valued at $1.6 billion for the fiscal year.

The 25-nation European Union, Canada and nine other nations challenged the law at the WTO in 2003 and won.

The stakes are especially high for Canada. The country will impose retaliatory tariffs affecting $14 million in U.S. exports, a tiny fraction of total trade. But that amount could rise sharply depending on resolution of a dispute over lumber.

The United States has collected softwood lumber duties from Canada totaling about $4.3 billion and continues to collect them at a rate of more than $1 billion a year, Canada’s Trade Ministry said.

Depending on how the sides resolve the lumber fight, the United States may be able to disburse the duties to U.S. producers if the Byrd amendment remains in place.

Canada said yesterday that it would impose a 15 percent levy on U.S. live swine, cigarettes, oysters and some fish starting May 1. A Canadian official said the products were selected to punish companies represented by congressmen who support the Byrd amendment.

The European Union said yesterday that it would ask member states to slap 15 percent duties on U.S. exports of paper, agricultural goods, textiles, machinery and other products.

“We’re disappointed that this step is being taken. The United States is working to comply with the WTO decision regarding the Byrd amendment,” said Richard Mills, spokesman for the Office of the U.S. Trade Representative.

Other nations authorized to retaliate have not said they would do so.

A few U.S. lawmakers have tried to repeal or alter the Byrd amendment, officially called the Continued Dumping and Subsidy Offset Act.

But more than 70 senators have publicly voiced their support for the measure and called for a negotiated change in WTO rules to accommodate it.

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