US sees new retaliation threat from major trading partners

US trade officials said Wednesday they expected the European Union and other trading partners to seek permission to retaliate on possibly hundreds of millions of dollars of American exports after the United States failed to win more time to comply with a WTO ruling.

John Veroneau, general counsel in the US Trade Representative's office, told Reuters US officials were unable to convince the EU and other trading partners to give the United States more time to repeal the so-called "Byrd amendment," which was declared illegal by the World Trade Organisation one year ago.

The EU and other trading partners face a Monday deadline to put their retaliation request on the agenda for the WTO Dispute Settlement Body's next meeting on Jan. 23rd.

The Byrd amendment, which distributes to US companies the money raised by anti-dumping duties on "unfairly traded" imports, was approved by Congress in 2000 and immediately challenged by the EU and 10 other trading partners as a violation of WTO rules.

Previously, the funds went into the general treasury instead of flowing to companies that brought anti-dumping cases against low-priced import competition.

Opponents charge the provision encourages US companies to file more anti-dumping cases by giving them a government subsidy in addition to import protection.

In the past three years, the Bush administration has doled out about $710 million to US ball bearing, steel, seafood, pasta, candle and other companies under the programme.

US Customs, which administers the program, paid out $150 million to companies in early December. Another $90 million in payments are on hold pending the outcome of a court case.

The United States missed a Dec. 27 deadline for repealing the program, which enjoys strong support in the US Congress. However, the Bush administration is expected to recommend again eliminating the measure as part of its annual budget plan, which is due out by early February.

The EU has been the most vocal about threatening to retaliate, but other countries that challenged the Byrd amendment also could take that step.

Those were Japan, Canada, Australia, Brazil, Chile, India, Indonesia, South Korea, Thailand and Mexico.

"Right now, we expect some but not necessarily all to seek authorization to suspend concessions, "Veroneau said, using WTO jargon for retaliation.

EU officials have not yet indicated how much trade retaliation they could seek. However, Veroneau said he was skeptical trading partners could prove they had suffered any lost trade because of the programme.

Unless they can prove lost trade, countries are not entitled to retaliation under WTO rules, he said.

The matter is expected to go to a WTO arbitrator to decide what if any retaliation countries can impose.