Tim King

in Brussels

The European Union yesterday sought permission from the World Trade Organisation (WTO) to retaliate against American trade sanctions of €200 million per year.

The request has been co-ordinated with Japan, Canada, Mexico, Brazil, Chile, India and Korea, which also want to retaliate against the Byrd Amendment, said to be one of the most notoriously self-serving pieces of US trade legislation.

The amendment is a law affecting complaints about unfair subsidies and the dumping of goods on the American market by the US's trade competitors. It provides that as and when the US imposes anti-dumping or anti-subsidy duties on foreign importers, the revenue from those duties goes to the American company that initially brought the complaint. Previously the revenue went to the US Treasury.

The US's trading partners complained to the WTO that the Byrd amendment provided American companies with a direct financial incentive for filing complaints and also forced foreign companies to finance their American competitors.

The WTO ruled the Byrd amendment illegal on January 16th last year. The office of the US Trade Representative, Mr Robert Zoellick, announced that the US would comply with the ruling but it had failed to do so by the December 27th deadline.

The EU yesterday requested the WTO to authorise sanctions but at this stage set no price on them. The EU proposed that the level of sanctions should be proportionate to the amount paid out each year to American companies.

In 2001, $220 million was collected in duties and paid on, followed by $330 million in 2002. For 2003, the total is estimated at $240 million, of which about $70 million was collected from European exporters. A WTO committee will consider the request on January 26th.

The EU's trade commissioner, Mr Pascal Lamy, spelled things out for Congress, saying: "I hope the US will now take action to remove this measure, thus avoiding the risk of sanctions." The amendment has been disowned by successive US administrations.

It was passed by Congress in October 2000, just before the presidential and congressional elections, while the Clinton administration was trying to push through its last pieces of legislation. Senator Robert Byrd, a senior Democrat, attached the amendment to a farm bill.

The EU is proposing that retaliation should target the industries that have done well out of the Byrd amendment.

The EU already has permission to impose $4 billion in sanctions against US goods from March 1st, as retaliation for tax-breaks for American foreign sales Ccorporations, also ruled illegal by the WTO.