001064 WTO Rules Against US Lamb Sanctions

Washington - The United States is facing another adverse decision from the World Trade Organization in a high-profile trade case involving U.S. tariffs imposed to protect American sheep producers from a flood of imported lamb from New Zealand and Australia.

The office of U.S. Trade Representative Charlene Barshefsky said that a WTO dispute panel issued a preliminary ruling that the Clinton administration violated WTO rules by imposing higher tariffs on lamb imports from the Southern Hemisphere neighbors.

"We are currently examining the report in greater detail to determine the basis for the panel's findings and how to respond," USTR spokeswoman Amy Stilwell said in response to questions about a published report on the WTO ruling.

The WTO panel ruling will not be made public until December after all parties have had a chance to file responses to the preliminary findings.

The United States would have the option then of appealing the decision, which would delay until next year possible retaliatory sanctions that could be imposed by the governments of Australia and New Zealand.

Peter Orwick, executive director of the American Sheep Industry Association in Denver, Colo., said the WTO decision should have no immediate impact on U.S. lamb prices because the administration probably will appeal the ruling, extending until next year any final decision.

"We fully expect the administration to file an appeal that will vigorously defend the president's action," Orwick said.

The administration's July 1999 decision to impose higher border taxes on lamb imports came in response to pleas from the domestic industry that American sheep ranchers were being harmed by a flood of imports from Australia and New Zealand in 1997 and 1998.

The administration imposed higher tariffs for three years starting in 1999, with a 9% tariff on the first 31,851 metric tons of lamb imports from Australia and New Zealand. Shipments above that level faced even stiffer tariffs, 40%.

The lamb quota for the first year - about 70 million pounds - represented the amount of lamb imported from New Zealand and Australia in 1998. The quota was allowed to rise slightly in following years, while tariff rates fell to 6% in the second year and will drop to 3% in the third year. The higher 40% tariff dropped to 32% in the second year and decrease to 24% in the third year.

New Zealand and Australia accounted for 90% of U.S. lamb imports in 1998.

Orwick said Clinton's action last year helped domestic producers by lifting depressed lamb prices, which had fallen to a low of 60 cents a pound paid to ranchers. They now average 80 cents to 85 cents per pound.

The rising prices, along with a $100 million government assistance program, have helped America's 67,000 sheep producers recover their economic footing.

Cindy Siddoway, president of the sheep industry group, said that the fact that the trade restrictions and the government assistance programs would continue during the WTO appeal process would allow ranchers to push ahead with "efforts to improve the industry's competitiveness."

Governments of both Australia and New Zealand brought a case against the United States before the WTO, the Geneva-based agency that governs world trade, after Clinton's decision took effect.

The two countries complained that the U.S. action violated WTO rules because it excluded from tariff increases lamb imports from Canada, Mexico and other nations that have preferential trade agreements with the United States.

WTO panels already ruled this type of exclusion violates world trade rules allowing countries to guard against sudden import surges.

The United States is appealing another decision in which the WTO ruled that higher U.S. tariffs on wheat gluten imports from the European Union were improper because other countries were exempted.

The ruling in the lamb case follows another WTO decision this year that $4 billion in annual tax breaks the United States grants American exporters violate WTO rules in another case brought by the European Union.

Congress is struggling to pass legislation before it adjourns for the year to replace the Foreign Sales Corp. program to meet WTO objections.

Among the top sheep-producing states are California, Colorado, Idaho, Iowa, Montana, South Dakota, Texas, Utah and Wyoming.

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