The World Trade Organization authorized the European Union and seven individual nations yesterday to impose more than $140 million in punitive duties on U.S. goods, on the grounds that Congress has not repealed a controversial anti-dumping law.
The ruling is the latest in a series of setbacks for Washington at the Geneva-based trade body that have angered U.S. lawmakers.
A WTO panel held that U.S. exporters could be penalized for the damage caused to foreign firms by the Byrd amendment, named for Sen. Robert C. Byrd (D-W.Va.). That law, which Congress approved four years ago, provides that when foreign manufacturers are found to be dumping goods in the U.S. market -- that is, selling at unfairly low prices -- any anti-dumping duties that are imposed can be handed over to the U.S. companies that brought the dumping case, rather than to the Treasury.
The law is popular on Capitol Hill, especially in the Senate, and it has benefited U.S. firms in such businesses as steel and pasta. But the WTO ruled in 2002 that it violates international trade rules, siding with major U.S. trading partners including the E.U., Japan, Canada, Mexico, Brazil, Chile, South Korea and India.
Until yesterday, it wasn't clear whether that ruling would carry the threat of sanctions. The Bush administration argued that no WTO sanctions were in order, because even if the Byrd amendment was illegal, foreign producers were not being damaged by the fact that anti-dumping duties were being paid to U.S. firms rather than the government. But the amendment's critics contended that it inflicts a double penalty on foreign companies, by forcing them to pay duties and rewarding their U.S. rivals.
The WTO essentially agreed with Washington's opponents, allowing them to slap retaliatory tariffs on U.S. goods equal to 72 percent of the money collected under the amendment during the most recent fiscal year. That would translate into as much as $144 million in duties on American exports, according to U.S. officials. Foreign governments put the figure slightly higher. E.U. and Japanese officials said they would not impose duties immediately, in the hope that Washington would change the law instead.
The retaliatory tariffs are less than the Europeans and others had sought, and they are far less than the $4 billion the WTO authorized the E.U. to impose in another case involving U.S. export subsidies. In that case, the E.U. has begun imposing duties on a number of U.S. products including lumber, carpets and jewelry, because Congress hasn't repealed the offending export subsidies either.
But yesterday's loss fueled grievances among lawmakers who have grown increasingly critical of the WTO for repeatedly ruling against U.S. dumping laws. It also prompted attacks from Democrats eager to capitalize on the trade issue. The presidential campaign of Sen. John F. Kerry released a statement deriding "the inability of the Bush administration to fight hard enough" to protect the Byrd amendment. The statement quoted Kerry as saying, "Once again the Bush administration failed to stand up for American companies and workers at the WTO, and as a result, unfair trade practices are hurting our economy and middle-class families."
In response, Chris Padilla, a spokesman for U.S. Trade Representative Robert B. Zoellick, cited a number of recent anti-dumping decisions in which the Commerce Department has ruled in favor of complaints brought by U.S. companies. "The administration not only vigorously defends our trade laws at the WTO, we've not hesitated to use them to defend the economic interests of American workers," Padilla said.
The administration, while objecting to sanctions in the Byrd amendment case, has urged Congress to comply with the initial WTO ruling by changing the law. In a statement yesterday, Padilla reiterated that position. "The United States will comply with its WTO obligations, and the administration will work closely with Congress to do so in a way that supports American jobs and American workers," he said.
That statement clearly hinted at a compromise that has been bandied about on Capitol Hill under which duties collected through the anti-dumping law would go to workers or communities hard hit by import competition, rather than to companies.