Baucus Welcomes WTO Case Against EU Technology Tariffs

by Mike Godfrey, Tax-News.com, Washington

30 May 2008

Senate Finance Committee Chairman Max Baucus (D-Mont.) has welcomed the US Trade Representative’s decision to request World Trade Organization (WTO) dispute settlement consultations with the European Union concerning technology tariffs.

The case, announced by US Trade Represenative Susan Schwab on 28th May, challenges duties that the EU imposes on innovative technologies that should be duty-free under the WTO Information Technology Agreement (ITA).

“This is exactly the kind of enforcement I called for during last week’s hearing and I commend Ambassador Schwab for taking action,” remarked Baucus, referring to the panel's hearing on the Trade Enforcement Act of 2007, which he introduced last year in a bid to increase the enforcement capabilities of the US Trade Representative and other agencies.

“We must foster innovation and open markets for American companies and our trade enforcement tools must keep pace. I look forward to passing legislation this year that will give USTR the enforcement tools American workers and businesses deserve," Baucus added.

According to the USTR, the EU in the past several years has adopted a series of measures that resulted in new duties on imports of specific high-tech products – cable and satellite boxes that can access the internet, flat panel computer monitors, and certain computer printers that can also scan, fax and/or copy. Global exports of these products were estimated at over USD70 billion in 2007.

These electronic products were included in the ITA, a plurilateral agreement negotiated under the auspices of the WTO in 1996 that eliminated duties/import tariffs on a wide range of information technology products.

The EU claims that it can now charge duties on these products simply because they incorporate newer technologies or additional features. But Washington argues that, in effect, the EU is taxing innovation – a move that could impair continued technological development in the information technology industry, and raise prices for millions of businesses and consumers.

The United States claims to have raised its concerns with EU officials on repeated occasions over the past 20 months, in both bilateral and multilateral settings, while the issue has been the subject of at least four rounds of informal discussions under the auspices of the WTO ITA Committee in Geneva over the previous year.

In announcing the enforcement action, Schwab commented that: “It is critical that the European Union live up to its ITA obligations instead of imposing new taxes and duties on innovative technologies."

She added: “The EU should be working with the United States to promote new technologies, not finding protectionist gimmicks to apply new duties to these products. Therefore, we urge the EU to eliminate permanently the new duties and to cease manipulating tariffs to discourage technological innovation.”

The first step in a WTO dispute is for both parties to formally consult. If consultations fail to resolve the dispute within 60 days, the United States will be entitled to request that a panel be established to determine whether the EU is acting consistently with its WTO obligations.

Japan has also announced that it has requested dispute settlement consultations with the EU on this matter.

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