| Ongoing rows between the EU and the USA on trade matters are not attracting the attention they deserve. If not resolved, they could present a serious threat to Ireland’s economic prosperity. Punitive customs duties could hurt Ireland. |
The past decade has been one in which customs duties have been reducing world-wide. There has been a widespread appreciation that the freeing up from restrictions and costs of international trade increases everybody’s prosperity.
Unfortunately rivalry between the EU and the USA has recently been raising the threat of protectionism. Ireland, more than any other country in the EU or in the Americas, is dependent on importing most of its requirements, and exporting most of its produce. Protectionism may be an annoyance for the USA and the EU. It could be disastrous for Ireland.
Background
There are three principal disputes in progress between the EU and the USA in the area of trade relations. These concern bananas, US export aids, and US anti-dumping duties.
The EU restrict the importation of bananas into the EU and grant preferential treatment to banana exporting former colonies of EU member states. This is to the disadvantage of South American exporters in which US companies have large economic interests.
The World Trade Organisation have ruled that the EU restrictions are contrary to its rules. Following that ruling the USA unilaterally imposed punitive customs duties on a range of goods entering the USA from the EU.
The EU then negotiated a settlement regarding the banana trade but found that when it announced the settlement that the USA did not consider itself bound by it and continued the punitive duties.
In parallel with this dispute the EU challenged a US export incentive known as the foreign sales corporation regime. The World Trade Organisation ruled in favour of the EU on the original complaint, and on a further complaint following modification of the tax incentive by the USA. The USA have, according to the EU, until 19 October to appeal that decision. Should they not do so the EU will become entitled to impose customs duties on imports from the USA depending on the outcome of the arbitration process. These duties will not necessarily be on all items imported from the USA but will probably be imposed selectively.
A third area of dispute concerns the practice of the USA of paying over to US industries the proceeds of anti-dumping customs duties. The EU claims that such subsidisation of the industries is contrary to WTO rules. This dispute also has the potential to end up with new customs duties on trade.
Implications for Ireland
In both the EU as a whole, and the USA as a whole, foreign trade is dwarfed by domestic trade. It is, relatively speaking, not important. In Ireland foreign trade is critical to our economy, something that distinguishes us from the EU viewed as a whole. Furthermore, the USA is a major trading partner of Ireland.
If the EU impose customs duties on imports by Irish businesses from the USA, Irish economic growth could be seriously affected. A simple example would be a duty on the import of computer components, network components, or telecommunication components for software. Such duties might, in other EU states, be viewed as a useful form of protection for local industry. In Ireland they would be a severe handicap for Irish businesses using such imports as part of their raw materials.
Should the EU move after 19 October to impose punitive customs duties or ‘suspend concessions’, there will first be a procedure for the selection of the goods to be affected. Any Irish industry for whom American imports are significant have a vital interest in that selection procedure. It is possible for them to arrange (eg through KPMG trade and customs division) to be represented in that selection procedure so as to ensure that their interests are taken into account. To do this properly, they would need to formulate their economic case carefully and correctly express their commercial requirements in the somewhat technical language of customs.
It is most unfortunate that these disputes are presenting a threat to international trade at a time when the world economy is slowing down. The need at present is for a further freeing up of international trade, rather than restrictions upon it.
The key point is that Ireland’s interest in this is far greater than that of any other EU state. Every industry needs to review the possible impact upon it and assess how it would be affected if its imports from the USA were subject to customs duties, or increased rates of duty. |
Carol Lynch is Director in charge of Trade, Customs & Excise Services in KPMG.
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| Article appeared in the October 2001 issue.
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