41 Retaliatory customs duties on imports
from the United States
| (26472)
7737/05
COM(05) 103
| Draft Council Regulation establishing additional customs duties on imports of certain products originating in the United States of America
|
| Legal base | Article 133; QMV
|
| Document originated | 31 March 2005
|
| Deposited in Parliament | 7 April 2005
|
| Department | Trade and Industry
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| Basis of consideration | Minister's letter of 7 April 2005 and EM of 23 May 2005
|
| Previous Committee Report | None
|
| Agreed in Council | 28 April 2005
|
| Committee's assessment | Politically important
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| Committee's decision | Cleared
|
Background
41.1 In October 2000, the United States passed the Continued Dumping
and Subsidy Offset Act, which provides that anti-dumping and countervailing
duties imposed during the preceding fiscal year should be distributed
to those companies which had brought or supported the complaint
leading to their imposition. In common with a significant number
of other World Trade Organisation (WTO) members,[159]
the Community challenged this arrangement, and, following an appeal
by the United States, the WTO finally ruled in January 2003 that
the Act contravened the Organisation's rules. The United States
was then given until 27 December 2003 to comply with that ruling.
41.2 In order to preserve its rights, the Community lodged a request
with the WTO in January 2004 seeking authorisation to retaliate
against US non-compliance by applying an additional import duty
on a select list of US products. Following an objection from
the US, the WTO Arbitrator subsequently concluded on 31 August
2004 that the Community could impose retaliatory measures on imports
from the United States worth 72% of the payments made to the American
industry in the most recent year from duties collected from Community
products as a consequence of the Offset Act.[160]
In addition, the level of retaliation will be adjusted for each
year that the United States continues to be in non-compliance
by failing to repeal the Act. Under these terms, the Community
is authorised to apply sanctions to the value of $28 million against
disbursements made by the US under the Act in the period from
September 2003 to September 2004.
41.3 In November 2004, the WTO granted a new authorisation,
requested by the Community, to suspend every year the application
of tariff concessions to the US at a level not exceeding the annual
level of impairment determined in accordance with the arbitration,
this suspension taking the form of an additional duty on imports
from the US, selected from an indicative list notified in the
request.
The current proposal
41.4 In this document, the Commission has simply
sought to give effect to these rulings by drawing up a list of
selected products against which the tariff bindings it has granted
to the US would be suspended, and an additional rate of 15% imposed.
Also, as the authorised rate of retaliation will vary in line
with the level of disbursement under the Offset Act, the Commission
has drawn up a reserve list of products which would be targeted
should that level rise in future. These steps would, however,
be temporary, in that they would be applied only until such time
as the offending measure has been repealed, at which point the
Commission says that it will submit a proposal repealing the Regulation.
The Government's view
41.5 The first indication of this proposal was contained
in a letter of 7 April 2005 from the then Minister of State for
Trade, Investment and Foreign Affairs (Mr Douglas Alexander),
in which he outlined briefly the need for the measure, explained
that the Council was likely to approve it in time for its introduction
on 1 May 2005, and pointed out that, as the proposal had only
just been received, it had not been possible to provide an Explanatory
Memorandum before the dissolution of Parliament.
41.6 We have now received an Explanatory Memorandum
of 23 May 2005 from the Minister for Trade at the Department of
Trade and Industry (Mr Ian Pearson), confirming that the proposal
was adopted on 28 April 2005. He also says that, when drawing
up the list of products covered by the proposal, the Commission
made best efforts to target goods which would cause maximum impact
to US interests, whilst causing minimum damage to European interests,
and that in particular it has targeted products which are available
from other sources. He adds that the Government was able to secure
the removal of those products which consultations with UK interests
had indicated would be problematic, but that, since it was not
possible to consult every company, it is possible that there will
be some damage to UK businesses.
41.7 More widely, the Minister comments that, although
the introduction of these retaliatory measures will do little
to improve transatlantic relations, a reasonable time for the
US to comply with the WTO's rulings has long since expired, and
that, in the absence of any firm American proposals to repeal
the offending measures, the introduction of retaliatory measures
is the only recourse open to the Community to keep up the pressure
on the US Government.
Conclusion
41.8 Given the background to this proposal, it
seems clear that the Community has acted strictly in accordance
with the rulings of the World Trade Organisation, and that the
steps which it has now taken are justified, for the reasons explained
by the Minister. However, as the Minister also points out, disputes
of this kind are not conducive to good transatlantic relations,
and experience has shown that they can escalate. Consequently,
although we are clearing the proposal, we think it right to draw
it to the attention of the House.
159 Including Australia, Brazil, Canada, Chile, India,
Indonesia, Japan, Korea, Mexico and Thailand. Back
160
The 72% figure represents the average trade effect of each dollar
distributed to US industry, as measured by an econometric model. Back
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