Update: U.S. files trade complaint against EU tech product taxes

The Office of the U.S. Trade Representative (USTR) has filed a trade complaint against the European Union, saying the E.U. has violated a World Trade Organization (WTO) agreement by taxing the import of some tech products.

The USTR, as well as the government of Japan, filed complaints with the WTO, alleging that the E.U. is illegally imposing import duties on cable and satellite boxes that can access the Internet, flat-panel computer monitors, and some multifunction computer printers, the USTR announced Wednesday. Those products represented a $70 billion global export market in 2007, the USTR said in a news release.

"It is critical that the European Union live up to its [WTO] obligations instead of imposing new taxes and duties on innovative technologies," U.S.Trade Representative Susan Schwab said in a statement. "The EU should be working with the United States to promote new technologies, not finding protectionist gimmicks to apply new duties to these products."

Representatives of the E.U. did not immediately respond to a request for comments.

U.S. complaints against the E.U. actions have been simmering for several months.

The USTR alleged that the import duties violate the WTO's Information Technology Agreement (ITA), a pact negotiated in 1996 that eliminated import tariffs on a wide range of IT products designed for businesses.

The E.U. has contended, however, that the agreement didn't eliminate tariffs on consumer products, and the E.U. has maintained import tariffs of 6 to 14 percent on the disputed products. As the price of flat-screen monitors and other products covered in the complaint have dropped in recent years, consumers have increasingly purchased them. The E.U. has begun to re-classify some tech products as consumer goods.

The European Commission, the E.U.'s representative body on trade matters, has defended this practice. The E.U. classifies products on the basis of "objective criteria," Peter Power, the commission's trade spokesman, said in a September statement. "U.S. claims of E.U. re-classifying products in violation of ITA commitments are unfounded," he said then.

The Information Technology Industry Council (ITI), a U.S. tech trade group, disputed the E.U.'s reading of the WTO agreement. "There's never been a distinction -- never was, never will be -- between consumer lines and business lines of products in the ITA," said John Neuffer, ITI's vice president for technology and trade. "It's always been about high-tech products."

The E.U.'s attempts to classify the disputed products as consumer goods is an "artificial distinction," Neuffer added.

The USTR suggested the E.U. is "taxing innovation." The E.U.'s actions "could impair continued technological development in the information technology industry and raise prices for millions of businesses and consumers," the USTR said in a statement.

ITI praised the USTR's decision to file a complaint. It's "very clear" these products should be covered by the WTO agreement, ITI said.

"In our view, the E.U. has been systematically ticking off products that are covered by the ITA and dumping then out of the ITA," Neuffer said. "We see this as an assault on free trade ... and we also see this as an assault on innovation."

"This case is about the E.U.'s systematic failure to live up to its international obligations," Rhett Dawson, ITI's president, said in a statement. "The E.U.'s willful disregard of its commitments harms America's innovative high-tech firms and their workers, who face an uneven playing field in Europe because of the arbitrary tariffs."

This story was updated on May 28, 2008