U.S. to Notifies WTO of Intent to Raise Tariffs

Unfair EU Restrictions on U.S. Rice Force U.S. to Notify WTO of Intent to Raise Tariffs

WASHINGTON – Facing an imminent deadline, the United States announced today it has asserted its World Trade Organization (WTO) rights and notified the WTO of its intent to withdraw certain tariff concessions because it has not reached agreement with the European Union (EU) over access to the European rice market.

The EU unilaterally decided last September to change its rice import system by raising tariffs on brown rice imports above the rate to which it had agreed as part of the EU’s Uruguay Round obligations. The new system unfairly limits the access of American rice farmers to the European market, affecting U.S. brown rice exports valued at approximately $33 million a year on average since 1999.

Under WTO rules, when a Member makes a change in its tariff obligations, certain trading partners are able to negotiate offsetting benefits. Because the U.S. and the EU were not able to reach agreement, the U.S. has the right to raise tariffs on an offsetting amount of imports. The EU has substantially increased tariffs on U.S. rice exports. The U.S. action will allow tariffs to be increased on products of which the EU is the dominant supplier in order to compensate for the higher EU tariff. March 1, 2005 is the deadline for the U.S. to assert its rights, and WTO rules require the U.S. to provide a 30 day notice of the action.

"I’m disappointed we have not been able to resolve this dispute with Europe. We feel that the new European system is unfair," said U.S. Trade Representative Robert B. Zoellick. "We have been trying for months to find a fair resolution that balances the concerns of both sides. Since we have not resolved this problem through negotiations, we have to notify the WTO of our intent to exercise our rights to withdraw concessions."

Background:

Until September 1, 2004, the EU had determined the tariff for brown rice imports under the margin of preference (MOP) regime negotiated during the Uruguay Round. The MOP regime allowed the EU’s applied tariff rate to be set lower than the bound tariff rate, based on the differential between the EU intervention (support) price and the reference import price, taking into account an adjustment factor. EU reforms to the Common Agricultural Policy (CAP) in 2003 significantly lowered the intervention price for rice, which would have led to a substantial reduction in the EU rice tariff under the MOP. As part of the CAP reform package, the EU received a mandate from the Council to renegotiate the MOP under the terms of GATT Article XXVIII.

Pursuant to WTO rules, the EU has been negotiating with the United States since 2003 with respect to trade compensation, but no agreement has been achieved appropriately compensating the U.S. for the EU’s tariff change.

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