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Archive for Saturday, April 30, 2005

U.S. exporters face penalty tariffs

Trade war begins to heat up Sunday

April 30, 2005

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— U.S. clothing, paper products and sweet corn soon will be more expensive for Europeans. For Canadians, American cigarettes, hogs, oysters and fish will cost more. For the U.S., it's all part of a new trade war that will mean lost sales and probably lost jobs.

Starting Sunday, American exporters of a wide range of products will be hit with penalty tariffs of 15 percent levied by Canada and the 25-nation European Union because of U.S. government payments to American companies that have been ruled illegal by the World Trade Organization.

Given current feelings in Congress, those penalties and additional sanctions pending in other countries could stay in effect for a long time, despite the Bush administration's opposition to the law that authorized the payments.

The law at issue, known as the Byrd amendment for its chief sponsor, Sen. Robert Byrd, D-W.Va., enjoys broad support in Congress because of the millions of dollars it provides to U.S. companies.

Under the Byrd amendment, passed in October 2000, companies that bring successful cases against foreign firms alleging that their competitors' products are being sold in this country at unfairly low prices not only get the benefit of higher penalty tariffs placed on the competing products but also receive the tariff revenue that the government collects.

Before the Byrd amendment, the extra border taxes went into the government's coffers instead of being turned over to U.S. companies. Foreign companies complain that the new process amounts to double jeopardy. Not only are their products being hit with penalty tariffs but their U.S. competitors are getting a windfall from those tariffs.

The European Union and other nations sued the United States before the World Trade Organization and won the case in January 2003.

When the Byrd amendment was not repealed by the end of 2003, the EU and seven individual countries -- Brazil, Canada, Chile, India, Japan, Mexico and South Korea -- won the right to impose a total of $150 million in economic sanctions on the United States.

That amount is linked to the levels of U.S. tariffs being imposed on companies based in the various countries. The amount is designed to rise in coming years as the tariff payouts to U.S. companies increase.

While the EU and Canada are the first countries to move ahead to impose sanctions, the other countries are expected to follow their lead in coming months to bring maximum pressure on Congress to repeal the law.

The sanctions will drive up the cost of U.S. products in the foreign countries and likely reduce sales, which could lead to job cutbacks in the United States.

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