DSB UPDATE: US LOSES ON STEEL, WINS ON APPLES

US preparing to withdraw steel tariffs?

According to US officials, the Bush administration is likely to repeal 20-month-old tariffs on imported steel this week in order to avoid massive retaliation by its trading partners. The final report by a dispute settlement panel that had ruled against US steel tariffs will be adopted on 10 December, after which countries can impose retaliatory measures on US products (see BRIDGES Weekly, 13 November 2003). The EC has threatened to impose retaliatory economic sanctions on US$ 2.2 billion worth of US exports. These sanctions would include products from electorally sensitive areas, such as Florida's citrus fruits. Japan, Norway and China have identified similar retaliatory measures.

If Bush reverses the tariffs, this will impact steel-producing states including Pennsylvania, West Virginia and Ohio. A source involved in the negotiations concluded, however, that the tariffs "would cause more economic disruption and pain for the broader economy than repealing them would for the steel industry". Lifting them would, in effect, benefit small and medium-sized Mid-western manufacturers. Steel executives believe that the repeal would lead to "painful" consolidation and the layoff of 25 000 to 30 000 workers as low-priced foreign steel will again flood the American market.

In March 2002, Bush decided to impose tariffs of eight to 30 percent on most steel imports from Europe, Asia and South America for three years to help defend the country's struggling steel industry against cheap imports. US Trade Representative Robert Zoellick announced last month that the tariffs were meant to provide "breathing space" of "a temporary nature to try to give steel companies and steelworkers a chance to get back on their feet". This breathing time is likely to be over soon.

WTO favours the US in ruling against Japan

On the 26 November, the WTO Appellate Body, or appeal panel, ruled in favour of the US that the restrictions Japan placed on the import of US apples to protect its plants from disease were unjustified and inconsistent with certain provisions of the WTO Agreement on Sanitary and Phytosanitary Measures. The case was an appeal of a 15 July ruling, in which Japan argued that it needed to prevent the introduction of fire blight (a bacterial infection that is native to North America) to its apple trees. Although Japan argued that WTO rules permit countries to act to protect humans, animals and plants from disease, the US responded that the restrictions were unnecessary and were preventing their apple growers from selling their crops to Japan. The WTO ruled out all six of Japan's legal claims, stating that the import restrictions on US apples were "without sufficient scientific evidence". The report did not support the claim that mature apples transmit the fire blight disease, and found it extremely unlikely that mature apples with no sign of infection could harbour the bacteria.

Fire blight affects apples, pears and roses, causing infected trees to die after producing shrivelled crops and showing burn-like symptoms. It is carried between trees by insects, birds, wind and rain. Japan had imposed a series of stringent measures to ensure that imports would not carry the bacteria. For apples to be exported to Japan from the US, farms must have a 500-meter buffer zone around disease-free orchards, inspection of orchards at least three times during the growing season and follow regulations on harvesting, packaging and treatment.

US farmers export more than US$ 390 billion worth of apples annually to other countries. On the ruling, US Trade Representative Robert Zoellick said "this is very important for gaining meaningful access to Japan's market". Although Northwest Fruit Exporters, an American non-profit group that manages export programmes from certain states, praised the ruling, Manager Jim Archer said he was unsure if the decision would boost US apple exports to Japan. He said he expected small volumes "for those growers who are interested in trying that market again. But it would be premature to make predictions because we don't know how this ruling will be implemented". New Zealand, a third party in the dispute, and kept out of Japanese markets for the same reason, believed its growers might see a US$ 50 million boost following the decision. The WTO will adopt the report within 30 days, and the Japanese Ministry of Agriculture, Forestry and Fisheries will inform the WTO early next year of its decision to accept the ruling and open technical talks with the US, reviewing current measures.

"WTO decision thrills growers," THE NEW ZEALAND HERALD, 28 November 2003; "WTO Upholds Ruling Japan Apple Import Regulations Illegal," AP, 26 November 2003; "Japan to review apple quarantine practice after WTO ruling," KYODO NEWS, 27 November 2003; "Apple growers reject WTO ruling," THE AGE, 27 November 2003; "Trade group praises WTO ruling on apple exports to Japan," AP, 27 November 2003; Tariff repeal may cost 30 000 jobs: big steel, THE NEW YORK POST, 2 December 2003; U.S. seen removing steel tariffs this week, REUTERS, 1 December 2003; President To Drop Tariffs On Steel, WASHINGTON POST, 1 December 2003; US advisers urge Bush to drop steel tariffs, CHINA DAILY, 2 December 2003.

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