Wisconsin Department of Commerce Newsletter
December 2004
Potential for New Punitive Tariffs on U.S. Exports

Just as the European Union (EU) is preparing to suspend the punitive tariffs it had imposed since last March on U.S. products, it looks increasingly possible that Wisconsin exporters may face a new set of punitive tariffs from a larger number of countries.

The World Trade Organization has ruled that the Byrd Amendment is an export subsidy that contravenes existing trade agreements. The amendment directs the proceeds of duties levied on foreign firms deemed to be dumping (selling products in the United States at below market prices) directly to their U.S. rivals. The issue is that the Byrd Amendment punishes foreign firms twice, once with the added duty and then by funding competitors. The European Union, Canada, Mexico, Japan, India, South Korea, Chile, and Brazil were given the authority to impose approximately $150 million in trade sanctions on the United States. While Chile lodged an initial complaint it has not requested authorization for retaliation from the World Trade Organization.

While the dollar value of this trade dispute is smaller than the recently solved $4 billion one with the European Union, it is unusual in the number of countries seeking action. Canada and Mexico are Wisconsin's two largest export destinations, accounting for approximately forty seven percent (47%) of Wisconsin's exports. The European Union buys just over twenty two percent (22%) of Wisconsin's exports.

The EU is expected to apply punitive duties worth approximately $80 million on U.S. products. The list of affected products will be a shortened version of the list created in the dispute over the U.S. Foreign Sales Corporation law and the subsequent Extraterritorial Act. Canada is proposing a one hundred percent (100%) surtax on selected items imported from the United States, including a variety of vegetable products, wood, wood pulp, paper, office machines, bicycles, and other products. Canada's full list by HS code is available at the Canadian Government's Canada Gazette Website (http://canadagazette.gc.ca).

--Stanley Pfrang

The newsletter is issued electronically every other month.

Please send comments or questions to Barbro McGinn, editor.

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