The US is mulling its options after the World Trade Organisation upheld a ruling ordering it to lift tariffs on lamb imports from New Zealand and Australia.

The WTO panel in Geneva said Washington needed to adhere to WTO policies, rejecting a US appeal against last year's decision to lift the tariffs. Imports of chilled or frozen lamb meat are covered by the ruling. The US now has up to 60 days to comply. It can either lift the higher penalties on the lamb imports, or it can keep them in place and offer compensation to Australia and New Zealand for the trade losses they are suffering. Richard Mills, a spokesman for the US Trade Representative Robert Zoellick, said the administration was considering what action to take.

Excessive duties

The WTO panel ruled that US investigation into this issue had not collected data from a sufficiently large group of producers. The WTO also found that the US failed to prove producers were under the "threat of serious injury". Australia and New Zealand accounted for about 90% of all lamb imports into the US in 1998. Most of the imports incurred a charge of 9% in 1999, which dropped to 6% in 2000 and 3% this year. There was also a stiffer charge of 40%, which eventually fell to 24% this year, for imports outside of a certain quota.

Welcome ruling

The New Zealand Meat Industry Association said the tariffs had cost the lamb industry up to 25m New Zealand dollars ($10.3m). The chief executive of the association said the victory confirmed the value of a rule-based trading system for a small trading national like New Zealand. "I have complete confidence in the commitment of the US to due process...they would take it on the chin and come into compliance," he added.

Richmond, New Zealand's largest lamb exporter to the US, has already said that the new ruling would enhance its profits next year. The Australian Agriculture Minister Warren Truss emphasised that such tariffs were unacceptable. "This is an excellent outcome for Australian lamb producers and exports and confirms... that the US was unjustified in placing restrictions on imports of Australian lamb."

Will there be an increase or decrease in total welfare for US society after the cessation of the tariff?  Use a diagram to explain your answer.

Wednesday, 2 May, 2001, 11:49 GMT 12:49 UK