A World Trade Organization panel gave broad backing on Monday to the United States, Japan and Taiwan in their complaint over controversial European duties on electronics products, and told Brussels to bring its trade measures into line with international rules.
The panel said the EU had imposed the duties on flat-panel displays, multifunction printers and television set-top boxes in violation of the WTO's Information Technology Agreement.
U.S. trade officials estimated worldwide trade in the three products at $44 billion in 2009. The European Union's 27 nations imported $7 billion worth of the products that year.
The European Commission criticized the 704-page ruling before it was published, repeating its view that negotiations on a comprehensive revision of the agreement were preferable to litigation on only a few aspects of it.
The report does not establish general principles that would imply any form of generalized conclusions, it said in a statement. Negotiations are the vehicle for mutually beneficial liberalization.
But it remains to be seen how seriously the EU's partners will take the call for negotiations on a revised pact when they believe Brussels is not even living up to the existing one.
Japan's minister of economy, trade and industry, Masayuki Naoshima, welcomed the ruling and called on the European Union to remove the illegal tariffs immediately.
U.S. Trade Representative Ron Kirk said the United States had won an important victory.
U.S. and Asian electronics producers like Hewlett-Packard Co, Motorola and Cisco unit Scientific Atlantic, are awaiting any sign that the EU might appeal the WTO panel's findings.
The parties have 60 days in which to appeal, but the Commission said Brussels had not yet decided whether to do so.
The EU has lost on everything, so if it appeals, it has nothing to lose. I think they will appeal, said Philippe De Baere, a partner at Van Bael & Bellis, which has represented Taiwan and Japan in the case.
The Information Technology Agreement, which is voluntary, abolished tariffs among 72 countries on products like computer screens and printers to foster trade in high-tech goods.
But the EU argued that added functionality since the agreement was reached in 1996 meant that some products were now consumer goods rather than information technology, and so were not entitled to the zero tariffs under the deal.
For instance, it said flat-panel computer displays could also now serve as television screens.
Brussels subsequently imposed duties ranging from 6 to 14 percent on the products.
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, U.S. trade chief Kirk said in a statement.
Otherwise, countries would be allowed under the pact to tax innovation, threatening continued technological development and raising prices for millions of businesses and consumers, U.S. trade officials said.
The U.S. Information Technology Industry Council also welcomed the ruling and said it was encouraging that Taiwan and Japan had fully backed the United States.
For us, it was a clear indication that the ITA, which is extremely important for our industry, is alive and well, and we're very pleased with the outcome, John Neuffer, council vice-president for global policy, told Reuters.
The three countries launched the case in June 2008. In September of that year Brussels proposed updating the agreement to take account of new technologies, a week before the three plaintiffs secured the creation of a WTO panel to rule on the dispute after consultations had failed to resolve it.
Officials in Taiwan said last month the ruling would save its exporters of flat-screens up to $611 million a year in tariffs.
Major flat-screen makers in Asia include South Korea's Samsung Electronics and LG Display and Taiwan's AU Optronics.
(Additional reporting by Juliane von Reppert-Bismarck in Brussels and Doug Palmer in Washington)