EU Considers Appeal in Trade Row Over Tariffs on Consumer Gear

GENEVA -- The U.S., Japan and Taiwan won in a World Trade Organization dispute over European duties as high as 14 percent on some information technology gear covered under the Information Technology Agreement for tariff-free treatment, officials said. About $44 billion in global exports of set-top boxes, LCD panels and multi-function printers is at stake in the agreement. Questions linger over the possible future tariffs on consumer goods that continue to evolve and incorporate communications and other functions.

"This is an important victory for U.S. technology manufacturers and workers,” said U.S. Trade Representative Ron Kirk. “This ruling affirms the principle that changes in technology are not an excuse to apply new duties to products covered by the Information Technology Agreement,” Kirk said. The EU does not claim victory in the case, an EC official said.

The ruling was expected, the EC official said, following European Court of Justice rulings and other developments. The WTO “forcefully and unequivocally rejected” the EU’s attempts to undermine the leading pro-innovation trade agreement of our time, said Information Technology Industry Council chief Dean Garfield.

The WTO decision didn’t find general principles or ways to deal with tariff classification decisions that may arise for a myriad of future developments and new functionality in consumer goods, the EC official said. The systemic implications in the case could be far broader, he said. The decision creates problems for how tariff classification rules are applied, he said. Implementing the decision could have a general impact on tariff classification rules for the Information Technology Agreement, he said.

The view that the ruling has resolved the issue of product convergence and technological development is very short sighted, the EC official said. The WTO dispute panel didn’t precisely decide how technological developments affect the agreement, he said, because the dispute was only about the three products. The EU argued that devices becoming multifunctional may mean they're outside the agreement, the EC official said. The U.S. argued that once a product has functions described in the agreement, it’s always eligible for tariff-free treatment, he said.

The ruling said not all the disputed products will fall within the scope of tariff-free treatment, the EC official said. Whether a flat panel display device falls within the scope of the agreement “would have to be determined on a case-by-case basis,” the report said. The ruling said the EU was too restrictive in the criteria it used, he said. The ruling said additional set-top box functionality may result in a product that doesn’t fall under the agreement. Case-by-case determinations “must be made” at the border, the report said.

An appeal is being considered, EC officials said. The EU thinks its legal position in the case is correct, the EC official said, and the panel didn’t agree. The EU also doesn’t agree with the panel’s approach on interpreting the agreement and what it means for tariff classification rules, he said.

An appeal might be a good idea because of systemic or policy reasons, the EC official said, even though the tariff measures on flat panel displays and multi-function machines have been or soon will be withdrawn because of European Court of Justice rulings in 2008 and 2009. Removing the remaining measures won’t be difficult if the EU doesn’t appeal, he said. The U.S., Japan and Taiwan have 20-60 days to ask to finalize the decision and the EU has the same time period to announce an appeal.

The U.S. hasn’t decided whether to open negotiations to expand the technology agreement. The EU has proposed negotiations to expand the scope and to deal with non-tariff barriers. Related negotiations are also being pursued in the long-running Doha Round of trade talks.