NEWS RELEASES

January 15, 2004 (1:45 p.m. EST) No. 6

BYRD AMENDMENT: CANADA PURSUES AUTHORITY TO RETALIATE

The Government of Canada and seven other World Trade Organization (WTO) members today submitted requests to the WTO to be granted retaliatory authorization in light of U.S. inaction in repealing the Byrd Amendment. The other WTO members are Brazil, Chile, the European Union, India, Japan, Mexico and South Korea.

"The WTO has ruled that the Byrd Amendment does not conform with international trading obligations," said International Trade Minister Jim Peterson. "It is our view that it effectively provides a distorting double advantage to U.S. industry and, if left in place, could lead to billions of dollars in Canadian-paid duties being handed over to U.S. companies. I call upon the U.S. to preserve the integrity of the global trading system by moving expeditiously to repeal the Byrd Amendment."

Under the Continued Dumping and Subsidy Offset Act of 2000, known as the Byrd Amendment, U.S. companies that support petitions for anti-dumping and countervailing duty investigations against foreign imports are able to benefit not only from the imposition of additional duties at the border, but also from the subsequent direct payout of those duties from the U.S. Treasury.

Canada and 10 other WTO members successfully challenged the Byrd Amendment on the basis that it provides illegal remedies not covered in relevant WTO agreements. The key finding of the original panel was upheld by the WTO's Appellate Body, and the U.S. was given until December 27, 2003, to comply with the decision.

The request for retaliatory authority comes in the wake of the failure of the U.S. Congress to move to repeal or amend the Byrd Amendment by that deadline. The request will be discussed in a special Dispute Settlement Body meeting scheduled for January 26, 2004, and may subsequently be referred to an arbitrator.

Canada and co-complainants are seeking a level of retaliation linked to the dollar amount disbursed under the Byrd Amendment. If taken, retaliation measures could come in the form of tariffs or the suspension of certain obligations under the WTO Agreements on Anti-Dumping and Subsidies and Countervailing Measures, the same Agreements that the Byrd Amendment violates.

Any decision to impose retaliatory measures would only be taken after the expected arbitration process at the WTO is completed and following public consultations in Canada over the next few months on various options.

For further information on the WTO Byrd Amendment challenge and to view the request Canada is presenting to the WTO, please consult the following Web site: http://www.dfait-maeci.gc.ca/tna-nac/dispute-en.asp#16.

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A backgrounder is attached.

For further information, media representatives may contact:

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

http://www.dfait-maeci.gc.ca

Backgrounder

THE BYRD AMENDMENT

• On October 28, 2000, former U.S. president Bill Clinton signed the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment.

• Under the Byrd Amendment, U.S. producers who support petitions for anti-dumping and/or countervailing duty investigations are eligible to apply for and receive duties collected as a result of the anti-dumping and/or countervailing duty orders.

• This means that U.S. companies that bring 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.

• In September 2001, 11 WTO members, including Canada, challenged the Byrd Amendment at the WTO. The 10 other co-complainants are the European Union, Australia, Brazil, Chile, 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 on Anti-Dumping and 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, a 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. To date, the U.S. has neither repealed nor amended the Byrd Amendment to bring itself into conformity with the WTO ruling.

• WTO rules require that, in the event of non-compliance by a member following dispute settlement procedures, complainants seeking to preserve their retaliation rights must seek authorization from the DSB within 30 days of the implementation deadline, in this case, January 26, 2004. Written requests for authorization must in turn be submitted 10 days before the meeting with the DSB.

• Accordingly, Canada will seek a special meeting of the DSB on January 26, 2004, to consider its retaliation authorization request and will submit this request in writing on January 15.

• Other complainants will also be filing their own retaliation authorization requests on January 15 for consideration at the DSB meeting on January 26.

• Byrd Amendment distributions to U.S. producers amounted to US$231 million in 2001 and US$330 million in 2002. While 2003 data is not yet available, total disbursements are estimated to be about US$280 million. The primary recipients in the U.S. have been in the sectors of ball bearings, steel and other metal and household items.

• To date, disbursements linked directly to duties paid by Canadian exporters amounted to US$5.2 million in 2001, US$2.5 million in 2002 and have been estimated at US$4.4 million for 2003.

• However, Canadian softwood lumber producers have already paid some US$1.7 billion in cash deposits, and these stand to be disbursed to U.S. lumber interests in the future unless the U.S. complies with the WTO ruling and repeals the Byrd Amendment. Given the process of administrative reviews and ongoing litigation, U.S. softwood lumber producers could receive payments under the Byrd Amendment in 2005-06 at the earliest.

• Canada is seeking a level of retaliation linked to the dollar amount disbursed under the Byrd Amendment from the prior year. This would ensure that Canada's retaliation rights would be protected in the event of any future large disbursements. Possible options include tariff measures on 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 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. Canada's request proposes the suspension of that requirement on imports from the U.S. as a possible option for retaliation.

• If the U.S. decides to challenge the retaliation request, the case would go to arbitration, a process that normally takes longer than the prescribed 60 days.

• The Canadian government will carry out public consultations in February and March on options for retaliation, including the injury suspension proposal and specific products that may be targeted for retaliatory tariff measures.

• The overall aim of Canada's actions is to encourage the U.S. to live up to its WTO obligations and to implement the rulings to repeal or amend the Byrd Amendment.