WTO OKs tax on U.S. exports

EU, 7 other countries win right to impose sanctions

More than $150 million at stake

Move follows U.S. failure to end corporate subsidies


BRUSSELS, Belgium - The World Trade Organization authorized yesterday the European Union and seven other major American trading partners to impose more than $150 million in retaliatory sanctions on exports from the United States.

The ruling comes after Congress failed for two years to repeal a subsidy for U.S. companies that the WTO found to be in violation of global trade laws.

The decision by the trade agency, which is based in Geneva, is only the latest example of several cases in which the United States has been found to be in breach of internationally agreed trade rules. Washington has lost a complaint from Brazil and other developing countries over $3 billion in cotton subsidies and has repeatedly failed to rewrite legislation that provided what the WTO found to be an unfair tax giveaway to U.S. companies conducting business abroad.

Adding to the problems for U.S. companies, the WTO also ruled this week against the United States and in favor of Canada in cases involving Canadian wheat and lumber.

The measure found to be illegal under global trade rules, known as the Byrd Amendment, allows U.S. companies rather than the government to receive the taxes Washington imposed on foreign companies deemed to be unfairly dumping cheap products in the United States.

The decision gives the 25-nation European Union, along with Canada, Japan, Brazil, Chile, India, South Korea and Mexico, the right to impose higher taxes on their choice of products worth slightly more than 70 percent of the value of the money received by U.S. companies.

But it was not clear how soon the countries would move to implement any countermeasures against the United States.

"The aim is to get the United States to comply with the rules," said Arancha Gonzalez, a spokeswoman for Pascal Lamy, the EU trade commissioner, "not to impose sanctions."

Similarly, Japan's economy, trade and industry minister, Shoichi Nakagawa, told reporters in Tokyo that Japan will wait until at least the fall before seeking approval of specific actions.

"Japan strongly hopes the United States will repeal the Byrd Amendment at an early date," Nakagawa said, "so that we can avoid invoking our right to take countermeasures."

Coming as the presidential campaign is heating up, the various defeats for the Bush administration were seized upon by the Democrats as proof of what they called the White House's poor record on trade.

"These decisions reflect the failure of the Bush administration to stand strong and tall on trade remedies," said Michigan Rep. Sander M. Levin, the ranking Democrat on the House Ways and Means trade subcommittee.

The Bush administration, which supports repeal of the Byrd Amendment, argued that not only has it imposed more anti-dumping cases through the Commerce Department than the previous administration of President Bill Clinton but it also has done more to help U.S. exporters through other means.

"Anyone can count up lawsuits at the WTO," said Christopher Padilla, a spokesman for the Office of the U.S. Trade Representative, "but we prefer to look at results."

Trade is a persistent issue in American politics and weighs particularly heavy this year in swing states where job losses in manufacturing have stoked fears among voters that offshoring jobs to foreign countries with cheap labor threatens to undermine the nation's economic health. Global competition has also fueled questions about trade policies and whether international trade laws are helping or hurting U.S. companies and American workers.

The dispute over who receives anti-dumping taxes, however, is modest compared to a broader fight with other countries over politically motivated steel taxes imposed by the Bush administration early in the president's tenure and the still-unresolved battle over tax breaks for U.S. companies overseas.

The steel taxes themselves are at the center of the dispute, since they represent the bulk of the money given to U.S. companies.

But the amounts involved in yesterday's ruling could increase substantially because the United States has collected billions of dollars in taxes on other products, including lumber from Canada, shrimp from Thailand and furniture from China, that has not yet been passed on to U.S. companies.

In the even bigger dispute over corporate tax breaks, the WTO permitted the EU to impose more than $2 billion in sanctions on U.S. firms. Only about $315 million in sanctions have been imposed so far. In that case, Brussels targeted the sanctions at U.S. products that could easily be replaced by imports from another country.

Like the offending U.S. tax law, which still has not been repealed, the Byrd Amendment will require the assent of Congress before it can be scrapped.

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