18 Additional customs duties on certain
US exports
| (25088)
—
—
| Draft Council Regulation establishing additional customs duties on imports of certain products originating in the United States of America.
|
| Legal base | Article 133 EC; QMV
|
| Department | Trade and Industry
|
| Basis of consideration | EM of 28 November 2003
|
| Previous Committee Report | None
|
| To be discussed in Council | 8 December 2003
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
18.1 In 1971, the United States introduced its Domestic International
Sales Corporation (DISC) scheme, which was subsequently declared
an illegal export subsidy by a GATT panel. That scheme was later
replaced in 1984 by the Foreign Sales Corporations (FSC) scheme,
and, although the Community contested its legality at the time,
it did not pursue the point due to the opening of the Uruguay
Round of trade negotiations. Following further complaints by Community
companies, and in view of the increasing amount of FSC subsidies
being granted by the US, the Community renewed bilateral contacts
in 1997, but, as this did not lead to any progress, it requested
a World Trade Organisation (WTO) panel to rule on the dispute.
18.2 In a report in 1999, the panel found that the
FSC amounted to an illegal export subsidy, and, although the US
appealed against this ruling, its findings were confirmed by the
WTO's Appellate Body, following which the US was given until 1
October 2000 to withdraw the scheme. In an effort to comply, the
previous administration passed an Act in November 2000, but, as
this did not modify the substance of the export subsidy scheme,
the Community launched a further panel proceeding on compliance,
whilst at the same time presenting a request for counter-measures
for an amount of $4.43 billion. However, with the establishment
of the compliance panel in December 2000, it was agreed, during
its procedures, the arbitration procedure on the amount of counter-measures
would be suspended, but that it would be automatically revived
upon adoption by the WTO of the Appellate Body's findings.
18.3 In August 2001, the WTO compliance panel examining
the US Act issued a report which fully supported the Community
case. In particular, it found that the Act also constituted a
prohibited export subsidy under WTO rules, and that it did not
amount to a withdrawal of the FSC subsidy. These findings were
confirmed by the WTO Appellate Body in January 2002, following
a US appeal. This led to the adoption in January 2003 of the
panel and Appellate Body reports, and to the reactivation of the
arbitration procedure, which resulted in the Community being authorised
to impose sanctions at the level of $4.04 billion by increasing
the customs duties on certain selected products by up to 100%.
18.4 The Commission then published in September 2002
a notice containing a list of products which it proposed should
be covered by any retaliatory measures. In line with WTO practice,
this was set at a higher level than the amount set by the arbitrator,
so as to allow for the exclusion of products following consultation
with interested parties (aimed at minimising any negative consequences
for Community exporters). Agreement was reached on a final list
of products of an equivalent value to the level of permitted counter-measures
notified to the WTO.
The current proposal
18.5 The measures proposed are now set out in this
draft Council Regulation, and are based on the principle that,
although the imposition in stages of additional import duties
of up to 100% on all imports of US origin covered by the WTO authorisation
is an appropriate counter-measure, a gradual approach, in terms
of both timing and level of duty, would be preferable. In general,
therefore, the proposal would set an initial level of duties at
5%, to be increased monthly up to a level of 17% by 1 March 2005.
Any action thereafter would be the subject of a further proposal
from the Commission.
18.6 The tariff bindings granted by the Community
to the US on the selected products would be suspended from 1 March
2004, and notified to the WTO before then, thus allowing the US
to comply with the WTO ruling before the counter-measures are
actually imposed. However, this suspension would be temporary,
in that it would only be applied until such time as the offending
US measures were removed; and, if the US has fully complied with
the WTO rulings before 1 March 2004, the Commission will put forward
a proposal for the repeal of the Regulation.
The Government's view
18.7 In his Explanatory Memorandum of 28 November
2003, the Minister for Trade and Investment at the Department
of Trade and Industry (Mr Mike O'Brien) says that, in drawing
up the list of products which would be the subject of retaliatory
measures, the Commission made best efforts to target goods which
would cause maximum impact on US interests, whilst causing minimum
damage to European interests, specifically targeting products
which are available from sources other than the US. He says that,
following consultation with UK business on the Commission's original
draft list, a number of products were removed, but that some items
still remain; and he adds that the introduction of additional
tariffs on goods of US origin will inevitably have some negative
impact on UK companies. He also says that it is difficult to
assess the degree to which the proposal to increase tariffs on
a month-by-month basis will affect that impact.
18.8 More generally, the Minister comments that the
introduction of these retaliatory measures "will do little
to improve transatlantic trade relations", but he notes that
the reasonable time period set by the WTO for US compliance is
now long expired, and that the US has yet to come forward with
firm proposals to repeal the offending measures. Consequently,
and on balance, the UK supports the view of the Commission and
other Member States that it is necessary to plan for the introduction
of retaliatory measures to keep up the pressure on the US to comply
with the WTO rulings and repeal the FSC scheme.
Conclusion
18.9 Since this appears to be a measured response,
fully consistent with WTO rulings, to a long-standing and illegal
US export subsidy, we do not consider it raises issues requiring
further consideration. However, given the Minister's comment
about the proposal's potential impact on wider transatlantic trade
relations, we think it right to draw it to the attention of the
House.
|
