WTO okays sanctions on U.S. - Byrd Amendment under attack

Just as the Bush administration was touting new bilateral free-trade agreements and other plans to boost commerce, the World Trade Organization has ruled that a formidable phalanx of U.S. trading partners could slap millions of dollars in retaliatory trade sanctions on Washington.

The ruling, announced Tuesday, came at the request of eight major trading partners, which charged that a piece of U.S. legislation called the Byrd amendment violates rules at the WTO, a 147-nation body that formulates global trade rules.

Enacted by Congress and put into effect in 2001, the Byrd amendment, named for West Virginia Democrat Sen. Robert Byrd, authorizes Washington to slap fines on foreign countries believed to be dumping their products by selling them below cost in the United States. The collected fines are turned over to U.S. companies believed to have been injured by unfair foreign competition.

The United States' trading partners didn't object to the fines per se, but they did object to turning the money over to specific U.S. companies instead of, say, depositing the money into the U.S. Treasury.

This, charged the European Union, Japan, Canada and five other major trading nations, amounts to double jeopardy -- i.e., it punishes foreign companies twice, first by fining them and then by funneling money to their U.S. rivals and making the Americans stronger.

The WTO agreed. As a consequence, the EU and others are authorized to impose tariffs of more than $150 million a year until Congress repeals the Byrd amendment.

The United States and the EU have feuded over this issue before, with Brussels giving Washington until the end of last year to shoot down the Byrd amendment. President Bush has said he wants the Byrd amendment repealed, but Congress, preoccupied with other issues and driven by protectionist passions during the U.S. economic downturn, hasn't gotten it done. Hence the WTO ruling, which can take effect anytime but has no formal start date.

The threat of fines has concentrated the minds of some leading U.S. business organizations, including the nation's biggest business nonprofit association, the U.S. Chamber of Commerce. The chamber has put the repeal of Byrd on its wish-list for the next administration, according to William Morley, vice president for congressional affairs for the organization.

Early indications were that Washington intends to comply with the WTO decision and that the Byrd amendment could be off the books before sanctions are applied.

"Today's determination will not affect the ability of the United States to continue enforcing its trade laws to impose duties on countries that sell unfairly dumped or subsidized products in the U.S. market," said Christopher Padilla, a spokesman for the U.S. Trade Representative.

"The Byrd amendment simply deals with how the funds collected from such duties are disbursed by the Treasury. The United States will work closely with Congress to do so in a way that supports American jobs and American workers."

U.S. companies collected $121 million last year on duties collected under the Byrd law; nearly two-thirds of that sum came from Japanese exporters.

E-mail David Armstrong at davidarmstrong@sfchronicle.com.