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U.S. Automotive Leather Industry Benefits From WTO Decision

28 January 2000

U.S. Automotive Leather Industry Benefits From WTO Decision On Australian Government Subsidies

    WASHINGTON, Jan. 27 -- On Friday, January 21, 2000, a World
Trade Organization (WTO) panel determined that the Government of Australia had
not complied with an earlier WTO directive to withdraw a A$30 million grant
paid to Australia's sole automotive leather exporter. The earlier directive
required the withdrawal of the grant to Howe & Co. Pty. Ltd. because it was an
unlawful export subsidy.
    This latest WTO ruling was issued after the United States objected to
Australia's purported compliance with the directive to withdraw the grant,
which included Howe's repayment of A$8 million. The United States
characterized this minimal repayment as insufficient and argued that a
simultaneous A$14 million loan to Howe nullified even that partial repayment.
The WTO agreed and concluded that repayment of the full A$30 million was
required to comply with WTO rules. Due to an agreement between the parties, no
appeal of this decision may be taken.
    The decision opens the way for the United States to impose high tariffs on
Australian products exported to the United States to compensate for the trade
damage inflicted on the U.S. automotive leather industry as a result of this
unfair trade practice. The United States has 60 days to present its views to
the WTO on the level of trade damage subject to retaliation; the WTO will then
have 45 days to determine the appropriate level of retaliation.
    The United States initially filed a protest with the WTO against
Australia's export subsidies to its domestic automotive leather industry in
1996. The United States Trade Representative took this action after the
Coalition Against Australian Leather Subsidies (CAALS) filed a petition under
section 301 of the Trade Act of 1974 against subsidies provided to Howe
through two Australian government export subsidy programs. After Australia
agreed to exclude automotive leather from these two programs, Australia gave
Howe a A$30 million grant in compensation for its loss of these export
subsidies. The grant was the subject of the current WTO action.

    CAALS is comprised of U.S. automotive leather tanners, Garden State
Tanning Inc., with facilities in Maryland and Pennsylvania, and Eagle Ottawa,
LLC, with facilities in Michigan and Iowa.  Lauren R. Howard, a partner and
international trade attorney with the Washington, D.C. law firm of Collier,
Shannon, Rill & Scott, PLLC, represents the Coalition.