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Dispute Settlement
Backgrounder
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On October 28, 2000, U.S. President Bill Clinton signed the
"Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act, 2001". The
"Continued Dumping and Subsidy Offset Act of 2000"
(Byrd Amendment) was part of that Act.
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Under the Byrd Amendment (which amended the Tariff Act of 1930,
the principal U.S. trade remedy statute), anti-dumping and countervailing
duties are given to U.S. producers who supported those trade
remedy actions. These duties were previously deposited in the
U.S. Treasury.
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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.
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In September 2001, eleven World Trade Organization (WTO) Members,
including Canada, challenged the Byrd Amendment at the WTO.
The ten other co-complainants were: Australia, Brazil, Chile,
the European Union, India, Indonesia, Japan, Korea, Mexico,
and Thailand.
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In September 2002, a WTO Panel determined that Byrd payments
to U.S. producers are not consistent with U.S. obligations under
the 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.
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Following a U.S. appeal, in January 2003, a WTO Appellate
Body report upheld the key panel findings against the Byrd Amendment.
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A WTO Arbitrator subsequently gave the United States 11 months
(until December 27, 2003) to bring its measure into compliance.
The United States did not meet this deadline.
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WTO rules require that, in the event of non-compliance by a
Member following dispute settlement procedures, complainants
seeking to preserve their retaliatory rights must seek retaliation
authorization from the Dispute Settlement Body (DSB) within
thirty days of the implementation deadline – in this case,
by January 26, 2004.
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Accordingly, on January 26, 2004, the DSB considered the requests
for retaliation authorization made by Canada and the European
Union, Brazil, Chile, India, Japan, Mexico, and Korea.
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Canada proposed as possible retaliatory options, a surtax on
imports from the United States and the suspension of the injury
test in Canadian anti-dumping and countervailing duty investigations
involving imports from the United States (under WTO rules, anti-dumping
and countervailing duties may only be imposed if dumped or subsidised
imports are causing, or threatening to cause, injury to domestic
producers).
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The United States objected to all the complainants’ requests
and the determination of the level of retaliation was referred
to arbitration.
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On March 2, 2004, the U.S. Congressional Budget Office released
a report which criticized the Byrd Amendment on several grounds.
The report states that the Byrd Amendment encourages trade remedy
cases, subsidizes the output of some firms at the expense of
others and discourages settlement of cases by U.S. firms that
brought those trade remedy actions. The report also highlights
trade retaliation among the consequences of not repealing the
Byrd Amendment. This report can be found here.
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On August 31, 2004, the WTO Arbitrator ruled that Canada, Brazil,
Chile, European Union, India, Japan, Mexico, and Korea could
retaliate against the United States on up to 72% of the annual
level of U.S. anti-dumping and countervailing duties collected
their respective exports and disbursed under the Byrd Amendment.
This level is based on an economic model developed by the WTO
Arbitrator to measure the trade effect of the Byrd Amendment
on U.S. trading partners.
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On November 23, 2004, the Government launched public consultations
aimed at seeking the views of Canadians on possible trade retaliation
against the United States. These consultations ended on December
20, 2004. Over 800 submissions were received from a wide range
of Canadian stakeholders.
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On November 26, 2004, Canada received final retaliation authorization
from the WTO. Brazil, Chile, the European Union, India, Japan,
Mexico and Korea also received final retaliation authorization.
The WTO provides that retaliatory action can be applied as long
as a non-complying Member fails to bring itself into conformity
with its international trade obligations.
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On April 29, 2005, the Government of Canada, in concert with
the Canadian softwood lumber industry, the Canadian Wheat Board,
and magnesium producer, Norsk Hydro, launched a challenge against
the Byrd Amendment in the U.S. Court of International Trade
(CIT). The basis of the complaint is that the application of
the Byrd Amendment to Canada is inconsistent with a specific
provision of the U.S. law that implemented the NAFTA. U.S. law
requires that amendments to U.S. trade remedy laws reference
NAFTA countries (Canada and Mexico) for those amendments to
apply to NAFTA countries. The Byrd Amendment does not do so.
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On May 1, 2005, the Government of Canada began applying a 15%
surtax on imports of live swine, cigarettes, oysters, and certain
specialty fish (e.g. live ornamental fish, certain frozen fish
like monkfish and Tilapia) from the United States. These retaliatory
measures expired on April 30, 2006.
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On August 22, 2005, the U.S. Congressional Research Service
released a report on the Byrd Amendment. The report provides
an overview of the Byrd law and the WTO dispute surrounding
it. It also weighs the pros and cons of the United States repealing
the WTO inconsistent Byrd Amendment and presents options for
Congress with regards to this dispute. The report can be found
here (pdf - 30 pages,
137 Kb).
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On September 26, 2005, the U.S. Government Accountability Office
issued a report on the Byrd Amendment titled “International
Trade: Issues and Effects of Implementing the Continued Dumping
and Subsidy Offset Act”. The Report concluded, inter
alia, that the Byrd Amendment undermines the effectiveness of
trade remedies generally. The report can be found here.
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On February 8, 2006, U.S. President Bush signed into law the
prospective repeal of the Byrd Amendment in the context of the
Deficit Reduction Omnibus Reconciliation Act of 2005 (budget
reconciliation package) for duties collected after October 1,
2007. This “prospective” repeal means that duties
collected up to September 30, 2007 remain subject to disbursement
to U.S. producers, even after that date. Duties collected after
this date will be deposited in the U.S. Treasury as per previous
practice.
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On April 7, 2006, the CIT confirmed the Canadian position and
ruled that the U.S. Government contravened the U.S. law implementing
the NAFTA by disbursing duties collected on Canadian goods.
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On July 14, 2006, the U.S. Court of International Trade issued
its final judgement in the Canadian challenge of the Byrd Amendment.
The Court ordered U.S. Customs not to disburse anti-dumping
and countervailing duties collected on imports from Canada and
Mexico to U.S. companies.
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According to U.S. Customs, total Byrd disbursements to U.S.
producers amounted to US$231 million in 2001, US$330 million
in 2002, US$240 million in 2003, US$284 million in 2004 and
US$226 million in 2005.
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Disbursements linked directly to duties paid on Canadian goods
amounted to approximately US$5.2 million in 2001, US$2.5 million
in 2002, US$9.5 million in 2003, US$15.5 million in 2004 and
US$6 million in 2005.
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