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Thu, Nov 25, 2004 - Page 12 News List

Canada threatens to retaliate against US

TIT FOR TAT Canada says it may impose retaliatory duties on US imports, after its southern neighbor failed to comply with a WTO ruling to drop the Byrd Amendment

BLOOMBERG

Canada said it may impose retaliatory duties on US imports for the first time since 1986, underscoring strains in the world's largest trading relationship.

Prime Minister Paul Martin's government, seeking to persuade the US to comply with a WTO decision, published a list of imports it may tag with punitive levies totaling about US$10 million next year. The items range from live swine to downhill skis.

"Retaliation is not Canada's preferred option, but the US has failed to live up to its international trade obligations," Canadian Trade Minister Jim Peterson said in a statement.

Canada, the EU and six other countries, including Japan and Brazil, won a WTO ruling in August ordering the US to drop its so-called Byrd Amendment. So far, the US has failed to comply and the law, which lets the government distribute to companies the punitive duties it collects, still stands.

Under the WTO ruling, Canada can apply punitive duties equal to 72 percent of the tariffs the US handed out to companies in the preceding year. Canada's Trade Department estimates that the US will distribute about US$14 million of duties on Canadian steel, magnesium and other goods in 2004.

The amount gathered would surge should the US begin distributing the duties it collected on Canadian lumber imports.

The US "intends to comply" with the WTO ruling against it, said Richard Mills, a spokesman for the US Trade Representative's office.

"We are currently working with Congress to bring the United States into compliance," he said.

Canada's plan "refers to many events which may or may not occur," Mills said in a statement.

Canada last retaliated 18 years ago, after the US raised duties on Canadian shingles. The two countries have had a free-trade agreement since 1988. They added Mexico in 1994's North American Free Trade Agreement.

The Continued Dumping and Subsidy Offset Act, known as the Byrd Amendment for sponsor Senator Robert Byrd of West Virginia, was passed by the US Congress in 2000 as part of a larger bill.

It gives companies the duties collected on goods that the US government deems to be unfairly subsidized or "dumped" at below-market prices.

Timken Co, the biggest US maker of automotive and industrial bearings, is among the companies that have benefited from the Byrd Amendment. Prior to the measure, the duties went to the US Treasury.

The EU and Japan already have posted lists of US goods they may target with higher tariffs. For Canada, the stakes are higher: The country counts on the US to buy exports that equal more than a third of its US$840 billion economy.

Canada and the US exchanged goods worth C$1.5 billion a day in 2003, about as much two-way trade as Canada does with Brazil in six months. Canada's exports to the US have tripled since 1989, the first year the free-trade agreement took effect.

The two countries already are embroiled in a dispute over lumber duties that have cost Canadian sawmills US$3.6 billion since May 2002.

Martin has said those levies are unjustified and amount to protectionism. The Canadian government also opposes a US ban on imports of Canadian live cattle and duties on Canadian wheat.

Martin's government published the list to give Canadian companies a chance to strike any of the items on which they depend for profits. Parties have a month to contact the government.

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