25 Suspension of additional customs duties
on certain US exports
| (27510)
9327/06
COM(06) 229
| Draft Council Regulation suspending and conditionally repealing Regulation (EC) No. 2193/2003 establishing additional customs duties on imports of certain products originating in the United States of America
|
| Legal base | Article 133 EC; QMV
|
| Document originated | 12 May 2006
|
| Deposited in Parliament | 16 May 2006
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| Department | Trade and Industry
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| Basis of consideration | Minister's letter of 17 May 2006 and EM of 24 May 2006
|
| Previous Committee Report | None, but see footnotes 80 and 81
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| Discussed in Council | 15 May 2006
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
25.1 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 replaced
in 1984 by the Foreign Sales Corporations (FSC) scheme, and, after
a World Trade Organisation (WTO) panel had found that the FSC
amounted to an illegal export subsidy, the US was given until
1 October 2000 to withdraw it. In an effort to comply, the previous
Administration passed an Act in November 2000, but, as this did
not modify the substance of the scheme, a further panel fully
supported the Community's view that the Act did not amount to
a withdrawal of the FSC subsidy. As a result, the Community was
authorised to impose sanctions at the level of $4.04 billion by
increasing the customs duties on certain selected products by
up to 100%.
25.2 The measures eventually adopted are set out
in Council Regulation No. 2193/2003,[79]
which adopted a gradual approach, in terms of both timing and
level of duty by setting an initial level of duties at 5% on 1
March 2004, to be increased monthly up to a level of 17% by 1
March 2005, with any action thereafter being the subject of a
further proposal from the Commission. Our predecessors noted in
their Report of 3 December 2003[80]
that the UK was concerned that the introduction of these measures
would do little to improve transatlantic trade relations, but
was prepared on balance to support the view of the Commission
and other Member States that it was necessary to plan for the
introduction of retaliatory measures to keep up the pressure on
the US to comply with the WTO rulings.
25.3 Our predecessors subsequently considered on
12 January 2005[81] an
Explanatory Memorandum from the Department of Trade and Industry,
indicating that President Bush had recently approved a Bill which
included provisions to repeal in part the effects of the FSC scheme.
The Commission was concerned that the US has still not complied
fully with its WTO obligations, and had requested a further ruling.
However, it had nevertheless asked the Council on 22 December
2004 to agree that the retaliatory duties imposed by the Community
in Council Regulation 2193/2003 should be suspended as from 1
January 2005, on the grounds that this would recognise that the
United States had to an extent decided to live up to its obligations
in this case, and would encourage it to do likewise in other current
instances of non-compliance. However, the proposal also provided
for Regulation 2193/2003 to become applicable again as from 1
January 2006, or 60 days after any confirmation by the WTO that
certain aspects of the recent United States legislation were still
incompatible with its obligations.
25.4 As our predecessors noted, the UK believed that
it was in the interests of trade relations between the Community
and the US that retaliatory duties should be suspended whilst
the WTO further considered the issue, and that it was also in
the interests of UK operators (including some small businesses
which had been adversely affected by the imposition of retaliatory
duties) that the situation should be normalised as from 1 January
2005. However, the UK also had reservations about the automatic
re-introduction of retaliatory duties should the WTO find that
the US remained outside its compliance obligations on FSCs, since
it believed that it was not possible at that stage to determine
the level of retaliation which the Community might be able to
reintroduce.
The current proposal
25.5 Although no official text was available at that
stage, we received a letter of 17 May 2006 from Minister of State
for Trade, Investment and Foreign Affairs (Mr Ian McCartney),
saying that the WTO had ruled on 13 February 2006 that the US
continued to be in breach of its commitments, and that retaliation
was therefore due to be re-introduced on 16 May. However, the
US Congress had subsequently taken further steps to repeal the
most contentious residual aspects of the FSC regime, thereby meeting
the Community's concerns. As a consequence, the Commission had
put forward as a matter of urgency a proposal to withdraw the
implementation of the tariff duty increases which had been due
to come into effect on 16 May —
a course which the UK wished to support, notwithstanding the absence
of Parliamentary scrutiny clearance. That proposal is now set
out in this document, on which we have received an Explanatory
Memorandum of 24 May 2006 from the Minister, confirming that it
was adopted by the Council on 15 May as Regulation (EC) No. 728/2006.
Conclusion
25.6 It is obviously welcome that a potentially
damaging trade dispute with the United States has now been averted,
and that the retaliatory measures due to be imposed by the Community
on 16 May have been withdrawn. We are accordingly clearing this
document.
79 OJ No. L 328, 17.12.2003, p.3. Back
80
(25088) - ; see HC 42-i (2003-04), para 18 (3 December 2003). Back
81
(26185) 15892/04; see HC 38-iii (2004-05), para 29 (12 January
2005). Back
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