The World Trade Organization has had a change of heart in a tariff dispute and left the United States bruised.
In February, a panel of global arbitrators had sided with the United States in its complaint that the European Union was violating world trade rules by reclassifying computer networking equipment in order to impose higher tariffs. But on Thursday, an appeals panel ruled in favor of the 15-nation European Union.
The United States complained to the WTO after British, Irish, and EU customs authorities, seeking to avoid a 1994 agreement that cut tariffs on computer equipment, reclassified computer networking equipment as telecommunications equipment -- which carried tariffs that were nearly double what they would have been under the old rules.
Washington said the higher tariffs affected billions of dollars of US exports, and a WTO dispute settlement panel ruled that the tariffs violated the Europeans' WTO obligations.
The US Trade Representative expressed disappointment at Thursday's ruling. But the United States should get over the hurt soon. As it argued Thursday, the real impact of the WTO reversal would be limited because the European Union has agreed to eliminate tariffs on the disputed products by 1 January 2000 as per the global Information Technology Agreement.
The US computer industry called the WTO reversal a serious setback that will allow European competitors to establish market share.
The United States puts the European market for computer networking equipment at US$5 billion annually and says US companies accounted for 50 percent of those sales.
