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Japan enacts tit-for-tat tariff on
US steel
For the first
time ever, Japan has retaliated against an
American trade policy it views as protectionist
with a 15% tariff on US steel imports that will
come into effect from September 1. The Japanese
government will review the items covered and
tariff rates every year. The tariffs, which could
yield over US$50 million, will affect 15 US steel
imports, including airline parts, ball bearings
and forklifts, said Japan's Ministry of Economy,
Trade and Industry. Of the 15 products, 14 are
currently imported duty free, while a 3.5% tariff
exists on the other. Last year, imports of these
15 items to Japan totaled around $120 million.
Japan decided to crack the whip after its
repeated pleas to repeal the US' controversial
anti-dumping law fell on deaf ears. Japan has long
been asking for the repeal of duties under the
so-called Byrd Amendment, named after the
Democratic Senator from West Virginia, Robert
Byrd, one of its chief sponsors. Under this
anti-dumping measure, Washington distributes the
money raised by duties on imports that the US
government deems subsidized or unfairly priced to
domestic companies that seek protection. The US
has paid out over $1 billion to industries ranging
from ball bearing and steel to pasta and candles
under the Continued Dumping and Subsidy Offset Act
of 2000, the formal name for the amendment.
The US has been levying tariffs on steel
from Japan and Brazil, among others, since 1999.
After the European Union, Canada, Japan and other
trading partners of the US mounted a challenge
against the law, the World Trade Organization
(WTO) in 2003 ruled that it indeed violated US
trade obligations because it punishes foreign
companies twice - first by way of the tariff and
then by giving away the proceeds to their US
competitors. The WTO further ruled that Japan and
seven other WTO member countries would be within
their rights to retaliate against it. The EU has
since imposed $28 million worth retaliatory
tariffs on US paper, clothing, fabrics, footwear
and machinery, while Canada has slapped some $14
million worth of similar duties on US cigarettes,
oysters and pork.
"We have concluded that
further effective pressure was needed by imposing
these measures to press the US Congress into
repealing this amendment," Japanese Trade Minister
Shoichi Nakagawa said in a statement after
declaring the retaliatory measure. "We hope the
United States will take this decision by Japan
seriously, and we strongly anticipate an immediate
repeal of the Byrd amendment." If the amendment is
repealed by September 1, Japan will roll back the
tariff.
US officials expressed unhappiness
at Japan's decision. "We are disappointed," said a
spokesman for the Office of the United States
Trade Representative (USTR). Calling Tokyo's
decision "unhelpful", Phil English, a Republican
from the steel-producing state of Pennsylvania,
told Reuters: "We all recognize that the Byrd
amendment will have to be revisited to accommodate
the adverse decision at the WTO. For this reason,
Congress has twice instructed the administration
to resolve this dispute with some of our trading
partners in the course of the current Doha round."
The Bush administration has been trying to
repeal the contentious amendment but without
result as it enjoys strong support within
Congress. But several trading lobbies have been
urging the administration to get rid of the
amendment, a demand that the Japanese action has
only made shriller. The Consuming Industries Trade
Action Coalition (CITAC) has again urged Congress
to repeal the amendment when it returns from
recess. "With Japan's announcement, the US now
faces a total of close to $100 million in
retaliatory tariffs due to the Byrd Amendment,"
said Steve Alexander, CITAC executive director and
president of lobbying firm The CMR Group.
"While more and more US exports will be
hit by tariffs as a result of Congress' failure to
repeal the law, CITAC is calling for congressional
action because this law is simply bad for the US
economy. The Byrd Amendment is a blatant subsidy
to a very few companies that, far from assisting
American manufacturing, actually undermines it.
Most American manufacturers do not benefit from
the Byrd Amendment. In fact, more than half the
Byrd Amendment payments in 2004 went to only nine
companies, and more than 80% of the payments went
to only 44 companies," said Alexander.
"The Byrd Amendment provides a double hit
to American manufacturers who use products subject
to anti-dumping and countervailing duties," said
CITAC counsel Lewis Leibowitz. "American companies
are the ones that pay these duties, and because of
the Byrd amendment, they have these duty payments
transferred to their US competitors. Therefore,
part of an industry is taxed to subsidize another
part of that industry."
According to
CITAC, American producers of steel, lumber,
candles, pasta, seafood, ball bearings and other
products have reaped hundreds of millions of
dollars in Byrd handouts from the federal
government at the expense of American consuming
industries over the past several years. Last year
alone, $284 million was doled out in Byrd
handouts. CITAC is urging support for HR 1121, a
bill aimed at repealing the amendment.
Though Japan's action may not cause a
major rift in US-Japan relations because of the
miniscule value of the tariffs compared with the
enormous bilateral trade, the move comes at a time
when the US' trade relations with China - Japan's
prime rival in Asia - are under strain as well.
Vice Economy, Trade and Industry Minister Hideji
Sugiyama said in a press conference that Japan's
retaliatory step was unlikely to affect ties
because Tokyo will implement the measure
sanctioned by the WTO and the US government itself
recognizes the need to scrap it. Japanese Prime
Minister Junichiro Koizumi also tried to play down
the issue. "We are always keeping in mind that one
conflict will not affect overall [relations]. So
we don't need to make an issue out of this," AP
reported Koizumi as saying.
(Asia Times
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