Senate Axes Byrd Amendment, Step 2 Cotton Program
Budget bill passing by a slim 51-50 margin contains repeal of controversial mechanisms
WASHINGTON, DC - 12/22/05 - A bill including repeal of two US programs ruled illegal by the World Trade Organization (WTO) has won final passage in the Senate and was sent back to the House of Representatives for another vote.
One of the programs facing repeal, created by the so-called the Byrd Amendment, diverts anti-dumping and countervailing duty revenue to US companies that bring dumping and subsidy cases.
The other, called Step 2, provides export subsidies to US-grown cotton.
By a vote of 51-50 yesterday, with Vice President Cheney breaking the tie, senators passed the bill that contains scores of provisions, including the two repeal measures.
The bill is aimed at reducing the federal government budget deficit.
Whether the House would vote on the bill today, or some time in January, when most members return from a holiday recess, was not clear.
The House previously had passed the bill, but, because the Senate altered it by deleting three provisions, the House must pass it again before it can go to the president for signature.
The White House has indicated strong support for the bill.
The Byrd Amendment - named after sponsor Senator Robert Byrd (D-West Virginia) and formally called the Continued Dumping and Subsidy Offset Act - passed as part of an agriculture spending bill in 2000.
It authorizes payment of anti-dumping and countervailing duty revenues to the companies that petitioned the government to investigate foreign goods that allegedly are dumped on the US market or produced with government subsidies.
A 2003 World Trade Organization ruling determined that the Byrd Amendment violates the WTO agreement, which does not allow such payments as a trade remedy for dumping and subsidies.
The bill passed by the Senate would repeal the Byrd Amendment but continue allowing companies to receive anti-dumping/countervailing revenue on any goods subject to such duties that enter the US market before October 2007.
The Bush Administration long has requested repeal of the controversial amendment, but opposition to its repeal remained strong in Congress, especially in the Senate.
Before passage of the Byrd Amendment, the US Treasury received all anti-dumping and countervailing duty revenue. Repeal of the amendment would restore that practice, reducing the federal budget deficit by about $300 million over five years.
In its ruling on the Byrd Amendment, the WTO authorized imposition of retaliatory tariffs on US imports - up to about $134 million in duties for 2005 - by 11 US trading partners, including the European Union (EU), Canada, and Mexico.
Dumping is the import of goods at a price below the home-market or a third-country price or below the cost of production. A subsidy is a grant conferred by government on a producer.
The deficit-reduction bill passed by the Senate yesterday also would eliminate by August 2006 a cotton export subsidy program called Step 2.
Step 2 is part of a larger farm program that pays domestic users and exporters to buy US-grown cotton whenever US cotton prices exceed world market prices.
Last March, the WTO ruled in a case brought by Brazil and cotton-producing companies from West Africa that the program violates the WTO agreement on subsidies.
Repeal of Step 2 would advance US compliance on the WTO cotton ruling.
In June, the US Department of Agriculture (USDA) complied with part of the ruling that did not need congressional approval: It changed the way it charges fees on two programs that guarantee credits for foreign purchases of US agricultural products by basing such fees on risk, as the WTO ruling required.
At the recently concluded WTO ministerial meeting in Hong Kong, US Trade Representative Rob Portman committed the US to repealing all cotton export subsidies by the end of 2006.
A declaration issued by ministers at the end of the meeting also calls for duty-free, quota-free access to cotton from the poorest least-developed countries, but only when implementation starts on any final agreement reached in the long-stalled, broader WTO negotiations.
The declaration also states as an objective that any negotiated cuts in domestic support spending for cotton farmers in wealthy countries would have to go deeper and be implemented faster than any other domestic agricultural subsidy cuts.
The US delegation worked intensively with negotiators from Burkina Faso, Benin, Mali, Chad, and Senegal, countries known as the C5, that had threatened to block any WTO agreement without satisfactory resolution of the cotton issue.
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