The Hindu Business Line : Will US repeal Byrd Amendment?

The rest of the world is keenly watching whether the US would revoke the Byrd Amendment and thus help underpin the rule-based multilateral trading system.

IT WOULD be quite understandable if a developing country resisted the liberalisation of the economy that washes away tariff walls in its wake and threatens to drown inefficient domestic industry under imported products.

In fact, that is why such trade defence mechanisms as the World Trade Organisation-mandated Anti-dumping Agreement and the Agreement on Subsidies and Countervailing Measures expressly allow imposition of definitive and provisional duties or price undercutting to offset the effects of dumping or subsidisation for all WTO member-countries to benefit from.

But if a developed country like the US, the bastion of free trade and a trade major, chooses to reimburse the proceeds collected from anti-dumping duties on industries that originally complained about dumping (in order to duck being an efficient producer regardless of the cost such a comport would inflict on the consumer), it is tantamount to perpetuating perverse incentives for such inefficient producers. Such a cynical disregard for welfare of others and also its own consumers deserves condemnation.

The WTO, the much-reviled world trade monitoring body, has drawn praise from dispassionate trade policy analysts the world over for pronouncing retaliation against such perverse incentives by the US, with its arbitrators giving the go-ahead to eight WTO members— Brazil, Canada, Chile, the EU, India, Korea, Japan and Mexico — to retaliate up t $150 million against the US for failing to comply with the Organisation's global trading obligation.

The issue goes back to 2000 when the Continuing Dumping and Subsidy Act or the so-called Byrd Amendment (named after the US Senator Byrd) of the mandated the distribution of the anti-dumping and countervailing duties to the companies that preferred complaints. It purposefully fostered an undue fillip to American industries to seek the imposition of duties on imported goods, thereby improving their competitiveness.

According to the EU, citing the US Federal Government figures, a total of $231 million was distributed in 2001 and around $300 million in 2002 with the main recipients being the bearing, steel and other metal, household item and food, in particular pasta, sectors. Although 2003 data about disbursements remain to be finalised, the information published so far reveals that distribution for that year would amount to $240 million.

In 2001 itself, 11 countries — the EU, Australia, Brazil, Chile, India, Indonesia, Japan, Korea, Mexico and Thailand) — together challenged the WTO compatibility of the legislation. A WTO panel in September 2002 and an Appellate Body in January 2003 corroborated that the Byrd Amendment was an illegal response to dumping and subsidisation.

The US had until December 27, 2003 to bring this legislation into conformity with the WTO rules. But the deadline passed, with Washington not doing anything to repeal it, although the former President, Mr Bill Clinton, opposed it from the very beginning while the President, Mr George W. Bush, advocated repeal, the US Congress maintained an ostrich-like posture, not even stirring.

So eight WTO members, including India, then requested the WTO Dispute Settlement Body (DSB) to authorise countermeasures on January 26, 2004. As the US demurred to these requests, the issue of the level of countermeasure was adverted to the arbitrator of the WTO.

The long-overdue announcement was at last made on August 31, by the WTO when its arbitrators authorised specific levels of retaliation on behalf of all the parties to the dispute. Reacting to this development, Trade Policy Analyst of the Washington-based Cato Institute, Mr Dan Ikenson, said: "It is proving difficult to pry Congressional hands from a tool that allows them to quietly subsidise their business constituents. Unfortunately, the relatively low levels of retaliation authorised — about $150 million this year — will do little to inspire a change in that mindset."

The rest of the world is keenly watching whether the US would revoke the Byrd Amendment and thus help underpin the rule-based multilateral trading system on which it makes tall promises and advocates for others, while flouting disciplines with impunity when it comes to its own matters.

The dispute over the Byrd Amendment is not an isolated example. A host of outstanding WTO rulings against American laws and policies — including the Foreign Sales Corporation Extraterritorial Income Tax provision and the Antidumping Act of 1916 — the USis yet to implement.

The United State Trade Representative's roaster of countries not complying with global trade rules and agreements under its Super 301 Trade Laws or watch/ priority list would lose credibility, if it does not conform to the WTO remit of a disciplined member of the rule-based trading system which it seeks to universally spread. The Commerce Minister, Mr Kamal Nath, was not wrong when he stated wryly that the free and fair trade concept would get vitiated if developed countries do not play by rules but set arbitrary standards that would throw the system into chaos to the detriment of world prosperity.