The European Union and Canada will impose a 15 percent duty on some U.S. imports after Congress failed to repeal a law that has handed...

Share story

The European Union and Canada will impose a 15 percent duty on some U.S. imports after Congress failed to repeal a law that has handed U.S. companies more than $1 billion collected from foreign rivals.

The retaliatory tariffs take effect May 1 and will largely affect U.S. paper, clothing and machinery headed to the EU as well as live swine, cigarettes and oysters sent to Canada. The European Commission said in a statement from Brussels that the new tariffs are borne from “the continuing failure of the U.S. to bring its legislation into conformity with its international obligations.”

At issue is the Byrd amendment — a U.S. measure designed to compensate industries hurt by foreign goods — which was ruled illegal by the World Trade Organization in September 2002.

Most Read Stories

Unlimited Digital Access. $1 for 4 weeks.

The new European tariffs, worth about $28 million, add to trans-Atlantic trade tensions as the EU and United States battle over aid for aircraft makers Airbus and Boeing, tax breaks for U.S. exporters worth $4 billion a year and European resistance to gene-engineered crops.

Canada’s 15 percent surtax would amount to $11.6 million this year, the Trade Ministry said.

Yesterday’s tariff announcement “is a strong message that we are all sending to the U.S. that international rule, those of the WTO, must be respected,” Canadian Trade Minister Jim Peterson told reporters in Toronto. “We just cannot allow the U.S. to illegally disburse funds that are collected.”

Responding to the tariff move, Richard Mills, spokesman for the U.S. Trade Representative, said in an e-mailed statement: “We’re disappointed that this step is being taken. The U.S. is working to comply with the WTO decision.”

In his budget proposal to Congress on Feb. 7, Bush called for repeal of the Byrd amendment, formally titled the Continued Dumping and Subsidy Offset Act, and said changing the law could save the U.S. Treasury $1.6 billion in the next fiscal year.

In the fiscal year ended Sept. 30, the U.S. Customs Bureau mailed $284 million in checks to about 473 companies seeking to be compensated under the Byrd amendment, according to the bureau’s annual report. As many as 1,900 companies applied.

Total payouts will rise as high as $1.6 billion this fiscal year unless the law is repealed, the EU says. The U.S. Congressional Budget Office last March estimated annual payouts will reach $1.15 billion by 2006 as distributions from tariffs on lumber begin.

The complaint against the U.S. law, named after Sen. Robert Byrd, D-W.Va., rallied the largest coordinated challenge in the history of the 10-year-old WTO.

The Geneva-based WTO gave the EU, Canada, Brazil, Japan, India, South Korea and Mexico the right to retaliate against the U.S. law Nov. 27. Chile also won the right to strike back on Dec. 17. To avoid penalizing European importers, the 25-nation EU is singling out products where the U.S. share of imports into the bloc is 20 percent or less.

In their complaints, the governments said the Byrd law enables the United States to punish exporters twice: first by imposing a duty and then by giving the money collected to the exporter’s rivals.

After the United States missed an end-2003 deadline for compliance, the WTO authorized governments to impose retaliatory duties on U.S. goods equal to 72 percent of the total paid by their companies.