March 31, 2005 No. 56 The Government of Canada announced today that it will retaliate against the United States in light of its failure to comply with the World Trade Organization (WTO) ruling on the Byrd Amendment. Following extensive consultations with domestic stakeholders, Canada will impose a 15 percent surtax on U.S. live swine, cigarettes, oysters and certain specialty fish, starting May 1, 2005. Today, the Commission of the European Union has proposed imposing retaliatory measures as trade sanctions on certain products from the United States. Canada continues to cooperate closely with all seven WTO Members that have received authorization to retaliate. These countries may also exercise their retaliatory rights over the next few months. “For the last four years, Canada and a number of other countries have repeatedly urged the United States to repeal the Byrd Amendment,” said International Trade Minister Jim Peterson. “Retaliation is not our preferred option, but it is a necessary action. International trade rules must be respected.” Over two years ago, the Byrd Amendment, which allows U.S. producers to receive anti-dumping and countervailing duties from foreign competitors, was found by the WTO to be inconsistent with U.S. trade obligations. In November 2004, the WTO gave Canada and the other co-complainants the authority to retaliate. “As large trading nations, let us not forget that the world is watching,” said Minister Peterson. “We must send a clear message by way of our actions.” The Minister emphasized that the Canada-U.S. overall trade relationship is as strong as ever. “Ninety-six percent of it works and works well and should be celebrated, but both sides lose from such disputes. We must put an end to them,” he added. Through consultations, Canada has made efforts to focus on products with alternative supply sources and to avoid products that are inputs to Canadian manufacturing. Canada’s current retaliation level is $14 million. The Government will review the products each year against the fluctuating nature of Byrd disbursements. -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 The Continued Dumping and Subsidy Offset Act of 2000 (known as 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 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 to them. The Byrd Amendment creates an additional financial incentive to file more cases. In January 2003, eleven WTO members (Australia, Brazil, Canada, Chile, the European Union, India, Indonesia, Japan, Mexico, South Korea and Thailand) successfully challenged the Byrd Amendment as a violation of U.S. obligations under the WTO Agreements on subsidies/countervail and anti-dumping. A WTO Arbitrator gave the United States 11 months (until December 27, 2003) to bring its measure into compliance. The United States has not repealed the Byrd Amendment. On January 26, 2004, Brazil, Canada, Chile, the European Union, India, Japan, Mexico and South Korea requested authorization from the WTO to retaliate against the United States. The United States 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 Canadian anti-dumping and countervailing duty investigations involving imports from the United States. On August 31, 2004, the WTO Arbitrator ruled that Brazil, Canada, Chile, the European Union, India, Japan, Mexico and South Korea could retaliate against the United States by up to 72 percent of the annual level of anti-dumping and countervailing duties on their respective exports disbursed to U.S. companies. Canada has the most at stake in this dispute. Its current retaliation level is $14 million this year but the United States has collected softwood lumber duties from Canada of approximately $4.3 billion and continues to collect them at a rate of over $1 billion annually. If the Byrd Amendment remains in effect, and once the current lumber litigation is complete, the United States will be in a position to disburse these duties to U.S. producers. However, Canada expects to win the litigation and expects the United States to fulfil its international obligations, including by refunding all lumber duties it has collected. On November 23, 2004, the Government of Canada launched a month-long public consultation process with Canadians on possible trade retaliation against the United States. Over 800 submissions were received from a wide range of stakeholders. On March 31, 2005, the Government of Canada announced that it would retaliate against the United States by applying a 15 percent surtax on Canadian imports of U.S. live swine, cigarettes, oysters and certain specialty fish (e.g. ornamental fish, frozen tilapia or monkfish). These retaliatory duties will take effect on May 1, 2005, following approval of the necessary Orders in Council. Further information on the U.S. Byrd Amendment and Canada’s retaliation decision can be found on the Web site of the Department of Foreign Affairs and International Trade (International Trade Canada) at http://www.dfait-maeci.gc.ca/tna-nac/disp/byrd-main-en.asp
