WTO grants sanctions against U.S. products

GENEVA -- The World Trade Organization gave the go-ahead Friday for punitive sanctions on U.S. exports from lobsters to industrial equipment because Washington has yet to comply with a two-year-old order to repeal a trade law that uses penalties collected from foreign manufacturers to aid their domestic rivals.

"It's been approved," said Amina C. Mohamed, Kenyan ambassador to the WTO, who is chairwoman of the organization's dispute settlement body.

The European Union and other plaintiffs sought formal WTO authorization to retaliate by imposing new duties against various U.S. products. Among the other potential targets are cod, cigarette, textiles, glassware, mobile homes, apples and lentils.

The EU has made clear that the carefully chosen products were aimed at influential parts of the United States that "could help Congress focus its mind on compliance."

On the EU list was heavy machinery made by companies like Caterpillar Inc., which is based in Illinois, the home state of U.S. House Speaker Dennis Hastert.

The heavy equipment giant opposed the trade law, and urged Congress to repeal the provision and bring the U.S. into compliance with the WTO, Caterpillar governmental affairs manager Doug Crew said in a statement Friday.

The value of the U.S. penalties has yet to be determined, but trade officials have said they could amount to more than $150 million a year.

That's tiny in comparison with the $2 billion in sanctions the EU threatened in its successful bid to force the United States to lift illegal tariffs on foreign steel last year.

The U.S. steel industry has been the major beneficiary of the 2000 law, dubbed the Byrd amendment for its sponsor, West Virginia Sen. Robert Byrd, D-W.Va. Other recipients included makers of pasta and candles.

The law was ruled illegal two years ago by the 148-nation WTO -- which referees global commerce -- on the basis of a complaint by eight WTO members: the EU, Brazil, Canada, Mexico, South Korea, Japan, India and Chile.

"The United States cannot point to any progress for the repeal of the Byrd amendment," even though Washington "has received ample time to bring itself into compliance," Canadian trade official Rambod Behboodi said.

The contested law allows American companies to receive proceeds from duties levied on foreign rivals for alleged "dumping" -- selling goods at below-market prices, making it impossible for American producers to compete.

The WTO backed claims that the amendment breaks trade laws by punishing exporters to the United States twice because they are first fined, and then those fines are passed on to their competitors.

"Japan cannot overlook this disregard by United States of its obligations under the WTO," said Japanese trade diplomat Keiichi Higuchi.

More than $800 million has gone to U.S. firms since 2000 and a new round of payouts which started Oct. 1 could total $290 million, officials said.

In August, a WTO arbitrator approved penalties of up to 72 percent of the money collected from foreign exporters and handed to American companies and said the winners in the case should submit lists of potential targets. Under WTO rules, however, formal authorization must come from the dispute settlement body.

On Tuesday, new EU trade chief Peter Mandelson said the sanctions could be applied early next year.

The EU, Japan, South Korea, India and Canada have submitted lists of exports that could be sanctioned.

EU trade official Raimund Raith told the meeting that Brussels wants the Bush administration to "transmit this message to Congress" and defend "U.S. credibility in the WTO."

The Bush administration indicated Friday that it would live with punitive new duties imposed by the World Trade Organization against U.S. products, even as it fights relentlessly to protect America's interests.

"We are continuing to work with Congress to bring the U.S. into compliance and we are consulting with our trading partners on these efforts," said Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick. Officials already notified the WTO that "we intend to comply with our international obligations in this matter."

"It's important to remember that these issues do not affect the ability of the United States to continue enforcing our trade laws to make sure Americans are being treated fairly," Mills said.