WASHINGTON — The European Union began charging a 15 percent tariff Sunday on imports of 10 kinds of U.S.-made apparel after Congress failed to rescind the Byrd Amendment, which was ruled illegal by the World Trade Organization.
Most classes of man-made fiber or cotton pants and shorts are affected by the tariffs, as are goods from other industries such as sweet corn and writing pads. The Byrd Amendment allows for the collection of tariffs on foreign goods when they are sold in the U.S. for less than they are in their home country.
The funds collected from those duties are redistributed to domestic companies that lost business to the low-priced goods. From 2001 to 2003, about $728 million in tariffs was collected and redistributed by the U.S under the provision, which was ruled illegal by the WTO in January 2003.
The WTO allows for punitive tariffs, but ruled the U.S. cannot redistribute the funds in such a way, opening the door to the tariffs on U.S. goods. The EU might expand the duties to include other goods such as cotton sweaters, cotton dresses and jeans until the Byrd Amendment is rescinded.
That might take some time. Rep. Jim Ramstad (R., Minn.) introduced legislation in the House to repeal the Byrd Amendment on March 3. The legislation, however, is not expected to be taken up during the next few months, as Congress considers the Central American Free Trade Agreement, among other legislative priorities.
In addition, the Byrd amendment has broad Congressional support and any move to rescind it is expected to meet strong opposition in the House and Senate. Sen. Robert Byrd (D., W. Va.), who sponsored the original legislation, and Sen. Mike De Wine (R., Ohio) recently sent a letter to the Bush administration underscoring the importance of the trade statute and calling on it to be resolved in the context of the current round of global trade talks.
Shortly after the WTO deemed the subsidies illegal, 70 senators sent a letter to the President opposing the ruling and seeking a WTO resolution. Many U.S. lawmakers want the WTO to address the issue and establish the right of its members to distribute funds collected as antidumping and countervailing duties.
Julia Hughes, vice president of international trade for the U.S. Association of Importers of Textiles & Apparel, said Europe has used duties on apparel products in such a way before, although the initial rate wasn’t as high.
“At 15 percent, you’re definitely going to see some impact on pricing, especially with the dollar being low and the euro being high,” Hughes said.