November 23, 2004 No. 134 The Government of Canada today announced that it is launching consultations with Canadians on possible trade retaliation against the United States in light of U.S. failure to comply with the World Trade Organization (WTO) ruling on the Byrd Amendment. The Byrd Amendment, which allows U.S. companies to receive anti-dumping and countervailing duties collected from foreign competitors, was found to be illegal under the WTO. “Clearly, retaliation is not Canada’s preferred option, but the U.S. has failed to live up to its international trade obligations and repeal the Byrd Amendment,” said International Trade Minister Jim Peterson. “These consultations will help us assess what actions Canadians want us to take.” “We want to hear from Canadian businesses themselves on the next steps that should be taken in challenging this U.S. measure,” said Minister of Finance Ralph Goodale. “The Government of Canada conducts public consultations every time retaliatory trade action is considered, and this dialogue will ensure that our upcoming response will be in Canada’s best interests.” On August 31, 2004, the WTO ruled that Canada, Brazil, Chile, the European Union, India, Japan, Mexico and South Korea could retaliate by up to 72 percent of the annual anti-dumping and countervailing duties on exports from these countries disbursed to U.S. companies in a given year. On November 10, 2004, Canada joined other co-complainants in submitting to the WTO the final retaliation authorization request reflecting the WTO Arbitrator’s decision on retaliation; this step is required by the WTO before any retaliatory measures can be applied. The request will be considered at a meeting of the WTO on November 24 and will be automatically authorized unless it is unanimously rejected by WTO members. Public consultations will assist the Government of Canada in assessing future actions. A Canada Gazette Notice has been published today. Interested parties are asked to comment by December 20, 2004, through the International Trade Canada Web site at http://www.byrd-consultations.gc.ca. The Canada Gazette Notice provides background information on the dispute and seeks input from Canadians on two possible retaliatory measures: tariff measures on certain imports from the U.S. and the suspension of the injury test in Canadian anti-dumping and countervail investigations on imports from the U.S. The Notice also contains a list of U.S. products upon which retaliatory surtaxes could be imposed. Canadian imports of these products are valued at approximately $5 billion. Those with additional questions on the public consultations or the Canada Gazette Notice can contact the Government of Canada at 1 800 769-0674. The Government of Canada will consider all comments received and will then determine the appropriate action to be taken. - 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. companies who support petitions for anti-dumping and/or countervailing duty investigations against foreign competitors to receive the duties collected as a result of the anti-dumping and/or countervailing duty orders. This means that U.S. companies bringing 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. The Byrd Amendment therefore creates an additional financial incentive to file such cases. 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, the 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 measure into compliance. Nearly two years 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 authorization from the WTO to retaliate against the United States. The U.S. objected to the requests, and the level of retaliation was referred to arbitration. The arbitration process lasted seven months. Canada proposed two retaliatory options: tariff measures on certain 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 U.S. 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. On August 31, 2004, the WTO Arbitrator ruled that Canada could retaliate against the U.S. by up to 72 percent of the annual level of anti-dumping and countervailing duties on Canadian exports disbursed to U.S. companies. All other WTO members involved in the arbitration received the same level of retaliation. On November 10, 2004, consistent with WTO rules, Canada returned to the WTO for a second request for authorization to retaliate, reflecting the WTO Arbitrator’s decision. That request will be considered at a meeting of the DSB on November 24. It will be accepted unless all members at the meeting, including Canada, reject the request. Distributions to U.S. companies under the Byrd Amendment amounted to US$231 million in 2001, US$330 million in 2002 and US$240 million in 2003. 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 approximately US$5.2 million in 2001, US$2.5 million in 2002 and US$9.5 million in 2003. Canadian softwood lumber producers have paid over US$3 billion in cash deposits to date. Small amounts of softwood lumber duties, for which no administrative review was requested, were disbursed in 2003. Approximately US$1 billion annually could begin to be disbursed starting in late 2007. This is due to the ongoing process of administrative reviews and NAFTA litigation.
