010517 WTO Rejects US Lamb Dispute Appeal

Geneva - A World Trade Organization appeals panel upheld a ruling that the United States acted illegally when it increased import tariffs on lamb from Australia and New Zealand.

The panel rejected a U.S. appeal against last year's decision and said that Washington should bring its policies in line with WTO regulations.

In Washington, Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, said, the administration is considering what action to take after the ruling.

The United States will have up to 60 days to inform the WTO how it will come into compliance with the ruling. Under WTO rules, the United States could either withdraw the higher penalty tariffs or offer compensation to Australia and New Zealand for the trade losses they are suffering because of the higher tariffs.

The U.S. administration in July 1999 imposed higher border taxes on lamb imports in response to pleas from the domestic industry that many sheep ranchers were being harmed by a flood of imports from Australia and New Zealand.

Tariffs were set at 9% for the first 31,851 metric tons (35,036 short tons) of lamb imports from the two countries -- which between them accounted for 90% of all lamb imports into the United States in 1998. Shipments above that level faced even stiffer 40% tariffs.

The quota was allowed to rise slightly in following years while the tariff rates fell to 6% in the second year and 3% this year. The higher 40% tariff dropped to 32% in 2000 and 24% in 2001.

Australia and New Zealand complained that the U.S. action violated WTO rules.

The panel ruled that the U.S. investigation establishing that domestic producers were being hurt was carried out incorrectly. It said the government had not used data from a sufficiently large number of producers, and it had wrongly included producers of live lambs, even though they themselves did not produce lamb meat.

It also found that the U.S. International Trade Commission, which carried out the investigation, failed to prove that there was “threat of serious injury” to producers and it had not proved that any injury to domestic producers was necessarily caused by the imports.

The United States, Australia and New Zealand must now agree on a deadline for Washington to change its policies. If Washington fails to meet the deadline, the complaining countries could ask the WTO for permission to impose trade sanctions.

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