August 31, 2004 No. 98 International Trade Minister Jim Peterson is pleased that World Trade Organization (WTO) arbitrators accepted Canada’s request to link the level of retaliation to the amount of payments made to United States producers under the Byrd Amendment in a given year. Canada will continue to assess its options; any decision on whether to move forward with retaliatory measures against the U.S. would be preceded by public consultations. “Canada’s retaliation rights are fully protected,” said Minister Peterson. “We continue to urge the U.S. to live up to its WTO obligations and to repeal the Byrd Amendment.” Today’s decision means that Canada’s authorized level of retaliation would fluctuate from year to year, depending on the annual amount of countervailing and anti-dumping duties on Canadian goods disbursed by the U.S. government. Canada is authorized to retaliate by up to 72% of the annual level of disbursement. This percentage is based on an economic model developed by the arbitrators to measure the trade effect of the Byrd Amendment. To date, U.S. producers have received between US$2 million and US$5 million annually in countervailing and anti-dumping duties paid on imports from Canada. The Byrd Amendment allows the U.S. government to distribute anti-dumping and/or countervailing duties collected every year to U.S. producers who requested or supported the imposition of those duties. The WTO previously determined that the Byrd Amendment is inconsistent with U.S. international trade obligations. In order to protect its WTO rights, Canada, along with seven other WTO members, requested retaliation authorization from the WTO as a result of the U.S. failure to repeal the Byrd Amendment. The retaliation authorization provided by the WTO arbitrators applies to all co-complainants, which are Brazil, Chile, the European Union, India, Japan, Mexico and South Korea. Canada’s authorization request identified, as possible retaliatory options, tariff measures on imports from the U.S. and the suspension of the injury test in Canadian anti-dumping and countervailing duty investigations against imports from the United States. - 30 - A backgrounder is attached. For further information, media representatives may contact: Jacqueline LaRocque Director of Communications Office of the Minister of International Trade (613) 992-7332 Media Relations Office Foreign Affairs Canada and International Trade Canada (613) 995-1874 http://www.international.gc.ca Backgrounder THE BYRD AMENDMENT On October 28, 2000, U.S. President Bill Clinton signed the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment. The Byrd Amendment allows U.S. producers who support petitions for anti-dumping and/or countervailing duty investigations to receive duties collected as a result of the anti-dumping and/or countervailing duty orders. This means that U.S. companies that bring trade remedy cases to U.S. authorities stand to benefit not only from the imposition of anti-dumping and countervailing duties on competing imports, but also from direct payments from the U.S. government when those duties are disbursed. In September 2001, 11 WTO members challenged the Byrd Amendment at the WTO: Canada, Australia, Brazil, Chile, the European Union, India, Indonesia, Japan, Mexico, South Korea and Thailand. The WTO Panel agreed with the complainants, and in September 2002, determined that these payments are not consistent with U.S. obligations under WTO agreements governing anti-dumping, subsidies and countervailing measures. The Panel determined that the payments constitute an additional measure against injurious dumping and subsidization not contemplated in either agreement. In January 2003, a WTO Appellate Body report upholding the key Panel findings against the Byrd Amendment was adopted by the organization’s Dispute Settlement Body (DSB). An arbitrator subsequently gave the U.S. 11 months (until December 27, 2003) to bring its measures into compliance. More than 18 months after the adoption of the Appellate Body’s report, the U.S. has not repealed the Byrd Amendment to bring itself into conformity with the WTO ruling. On January 26, 2004, in order to protect its WTO rights, Canada, along with seven other WTO members (Brazil, Chile, the European Union, India, Japan, Mexico and South Korea), requested retaliation authorization from the WTO. The U.S. objected to the complainants’ requests, and the determination of the level of retaliation was referred to arbitration. The U.S. argued that the Byrd Amendment did not affect trade. According to U.S. Customs and Border Protection, distributions to U.S. producers under the Byrd Amendment amounted to US$231 million in 2001 and US$330 million in 2002. As of March 1, 2004, disbursements calculated for 2003 are approximately US$190 million, with an additional US$50 million withheld by U.S. Customs pending the outcome of a domestic court case. The primary recipients in the United States have been in the ball bearing, steel and other metals, and household item sectors. Disbursements linked directly to duties paid on Canadian goods amounted to US$5.2 million in 2001, US$2.5 million in 2002 and have been estimated at US$4.4 million for 2003. Canadian softwood lumber producers have paid over U.S. $2.7 billion in cash deposits to date. Canada is continuing to challenge the U.S. duties through litigation under NAFTA and at the WTO. As a result, disbursements to the U.S. industry under the Byrd Amendment would not take place until October 2007. Canada, like other complainants, sought a level of retaliation that is linked to the dollar amount disbursed under the Byrd Amendment. The purpose of this methodology was to ensure that Canada’s retaliation rights would be protected in the event of any large future disbursements. Proposed Canadian retaliatory options are tariff measures on imports from the U.S., and the suspension of the injury test in the context of anti-dumping and countervailing duty investigations involving imports from the United States. Under WTO rules, anti-dumping and countervailing duties may only be imposed if dumped or subsidized imports are causing or threatening to cause injury to domestic producers. Canada’s request proposes the suspension of that requirement on imports from the U.S. as a possible option for retaliation. On August 31, 2004, the WTO arbitrators provided Canada with a formula by which to calculate Canada’s retaliatory authorization. This will allow Canada to retaliate up to the annual level of countervailing and anti-dumping duties on Canadian goods disbursed under the Byrd Amendment, multiplied by a factor of 0.72. This formula is based on an economic model developed by the arbitrators to measure the trade effect of the Byrd Amendment. To date, U.S. producers have received between US$2 million and US$5 million annually in countervailing and anti-dumping duties paid on imports from Canada. Before any retaliatory action is taken, Canada must return to the DSB and make a request to implement retaliatory measures in accordance with the WTO arbitration decision. There is no time limit for the request in the rules. The overall objective of Canada’s actions is to encourage the United States to live up to its WTO obligations and to implement the rulings by repealing the Byrd Amendment. The Government of Canada has made no decision on applying retaliatory measures against U.S. imports. Any decision to move forward with such measures would be preceded by public consultations.
