Economics & Trade Relations
Washington File
30 July 2002
Text: U.S., Korea Reach Accord on WTO Dispute Over Line Pipe
(Deal will let Korea increase exports to U.S. after Sept. 1) (1145)
The United States and the Republic of Korea have settled a
two-year-old dispute over line pipe exports from that country,
according to a July 29 news release from the Office of the United
States Trade Representative (USTR).
The deal will allow Korea to increase line pipe exports to the United
States in stages after September 1.
The World Trade Organization's (WTO) Dispute Settlement Body issued a
ruling in March on the dispute, which began when the United States
announced a tariff on line pipe imports in March, 2000 and Korea
protested that move to the WTO in September of that year.
A dispute resolution panel examined the case and issued a report that
was endorsed by the WTO's Appellate Body February 15 and finally
approved by the WTO's Dispute Settlement Body March 8 of this year.
The Appellate Body found that the United States did not satisfy WTO
rules for establishing the existence of a causal link between the
increased line pipe imports and serious injury to domestic producers.
Similarly, the Appellate Body found that the United States failed to
show that it applied the tariff only to the extent needed to remedy
the injury caused by increased imports.
The United States had imposed the tariffs under Section 201 of the
Trade Act of 1974.
WTO rules recognize a country's right to impose this type of trade
remedy when increased imports threaten an industry, according to the
USTR.
Under the U.S.-Korea agreement reached with the ruling, the USTR said,
the Section 201 tariff will be applied "only if line pipe imports from
Korea exceed 17,500 tons per quarter," with the tariff scheduled to
expire on March 1, 2003.
Following is the text of the news release:
(begin text)
OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20508
For Immediate Release
July 29, 2002
United States and Korea Resolve WTO Dispute on Line Pipe
WASHINGTON -- The Office of the United States Trade Representative
announced today that the United States and Korea have resolved a
two-year-old World Trade Organization (WTO) dispute over U.S. tariffs
on circular line pipe imported from Korea.
The agreement, which allows Korea to increase in stages line pipe
exports to the United States after Sept. 1, 2002, resolves Korea's WTO
challenge over U.S. tariffs that were imposed in March 2000 under
Section 201 of the Trade Act of 1974. WTO rules recognize a country's
right to impose this type of trade remedy when increased imports
threaten an industry.
Korea and the United States reached the agreement after the WTO
Dispute Settlement Body issued a mixed ruling in March that upheld
some provisions of the Section 201 tariff but found against the United
States on other issues. Under the U.S.-Korea agreement, the Section
201 tariff will be applied only if line pipe imports from Korea exceed
17,500 tons per quarter. The tariff is scheduled to expire on March 1,
2003.
Background
On March 1, 2000, the United States imposed a safeguard action under
Section 201 of the Trade Act of 1974 on circular welded steel line
pipe, after the U.S. International Trade Commission ruled that an
increase in imports from Korea was injuring the U.S. industry. The
safeguard measure imposed a tariff, currently equal to 11 percent, on
imports above certain levels over a three-year period.
Korea challenged the U.S. action before the WTO in September 2000, and
asked that a dispute resolution panel rule on the validity of the U.S.
safeguard measure. The dispute resolution panel issued a report that
upheld many important aspects of the safeguard measure, but found
against the United States on several issues. The Appellate Body upheld
these findings on February 15, 2002, and the WTO Dispute Settlement
Body adopted those findings on March 8, 2002. A summary of these
findings is attached.
Summary of WTO Appellate Body Report
The Appellate Body upheld three aspects of the U.S. safeguard measure:
-- The Appellate Body rejected the argument that the panel had created
a rule that the causation standard under Section 201 was itself
inconsistent with WTO rules.
-- The Appellate Body rejected the argument that the International
Trade Commission could make an affirmative determination only if a
majority of commissioners agreed that there was serious injury as
opposed to the threat of serious injury.
-- The Appellate Body found that the United States is not required to
explain, at the time of taking a safeguard measure, how that measure
conforms with WTO rules.
The Appellate Body found against the United States on the following
issues:
-- The Appellate Body found that the United States failed to provide
sufficient time for consultations with other WTO members between the
announcement of the Section 201 safeguard action and its effective
date and, accordingly, did not endeavor to rebalance the level of
concessions with other members.
-- The Appellate Body found that the United States did not provide a
sufficient guarantee that developing countries would receive
preferential application of the safeguard action as required by WTO
rules.
-- The Appellate Body found that the United States did not establish
the factual basis to exclude Canadian and Mexican line pipe from the
safeguard action, as required under the North American Free Trade
Agreement.
-- The Appellate Body found that the ITC's causation findings did not
satisfy WTO rules for establishing the existence of a causal link
between increased imports and serious injury or threat of serious
injury to domestic producers.
-- The Appellate Body found that the United States failed to show that
it applied the safeguard action only to the extent necessary to remedy
the injury caused by increased imports, and not injury caused by other
factors.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)