Trade disputes

1
Trade disputes

• WTO dispute settlement procedures
• Sanctions
• Examples

2
Pressure valves / safeguards in GATT / WTO

• Countries may temporarily raise protection in
  extraordinary circumstances
• Balance-of-payments crises to reduce excess
  imports
• Countervailing duties to compensate for foreign
  export subsidies
• Antidumping to respond to unfair foreign
  competition, dumping

3
Pressure valves / safeguards

• Decision about countervailing duties /
  antidumping tariffs handled by national trade
  administration in importing country
• typically initiated by local producers facing
  increasing import competition
• Foreign exporters rarely agree with assessment of
  countervailing duties / antidumping tariffs
• trade dispute

4
Whats a trade dispute in WTO?

• One member government believes that another
  member government is violating an agreement or a
  commitment made to the WTO
• In addition to unfair antidumping levies, cases
  often focus on non-tariff barriers and
  administrative trade practices
• Note initial antidumping determination purely
  national process

5
The WTO dispute settlement process

• Emphasis on consultations and voluntary
  settlement of disputes
• Detailed schedules for formal dispute settlement
  process
• complaint to Dispute Settlement Body
• expert panel
• report and proposed resolution
• process for appeals

6
The panel process

• Complaint and consultation
• 60 days for bilateral discussions
• Establishment of panel
• must be done within 45 days
• Final panel report to parties
• max 6 months after establishment of panel,
  includes conclusions and recommendations
• Final panel report to all DSB members
• 3 weeks after parties have received it
• Report automatically adopted after 60 days if
  there is no consensus against it

7
Appeals

• The panels ruling can be appealed by either
  party
• Appeals examined by three person group from
  permanent 7-member Appellate Body
• Appellate Body report in 60-90 days
• New report accepted or rejected by DSB within 30
  days
• rejection requires consensus

8
After adoption of panel report

• Country at fault must reform its policy according
  to recommendations
• statement of intent within 30 days
• compliance required within reasonable period of
  time
• Alternative is to negotiate payment of mutually
  acceptable compensation
• 20 days for negotiations
• Trade sanctions can be authorized by DSB if
  compensation is not agreed upon

9
Sanctions

• Retaliatory action suspension of concession and
  obligations should primarily be in same sector
• some possibilities to retaliate in areas of other
  WTO agreements
• Level of retaliation to match injury
• arbitration by original panel
• How effective is retaliation?
• How can small countries hurt the US?

10
WTO disputes 1995-2003

• 282 cases reported to DSB
• 64 resolved through consultations or suspended
• 69 adopted panel reports
• 16 active panels
• 133 pending or ongoing consultation
• only 4 cases where retaliation has been authorized

11
Retaliation authorized in 4 cases

• Foreign sales corporations
• EU complaint about tax benefits to exports. Level
  of retaliation USD 4,043 million. Not yet
  implemented
• Airplane subsidies
• Canadian complaint about Brazilian subsidies.
  Level of retaliation CAD 344 million. Not yet
  implemented

12
Retaliation authorized in 4 cases

• Bananas
• Latin American countries and US complaint about
  EU banana import regime. Value of retaliation
  USD 393 million. Withdrawn after agreement.
• Hormones
• US and Canadian complaint about EU ban of imports
  of hormone treated meat products. Level of
  retaliation USD 125 million. In force.

13
The Banana case

• The establishment of the Single Market 1992
  required unified banana policy
• widely different national policies
• Distinct interest groups
• protection of EU producers
• support to former colonies
• support to EU distributors
• consumer interest for cheap bananas
• Heavy lobbying of EU decision makers
• effective alliance in favor of protection

14
EUs 1993 banana policy

• Tariff free quotas for ACP bananas
• based on best year before 1991
• More restrictive tariff quotas for dollar bananas
• Quota licensing system for dollar bananas
  included shares reserved for ACP banana importers
• gt Clear discrimination of dollar bananas

15
WTO dispute settlement

• Ecuador, Guatemala, Honduras, Mexico, and Panama
  filed complaint with WTO in 1996
• joined by US, to defend interests of US banana
  companies
• Support for complaint from WTO panel and
  Appellate Body
• but EU unwilling to change until sanctions were
  imposed

16
GM next big case?

• Genetically Modified (GM) food products
• EU unwilling to allow imports of GM foods
• health / safety GM food may affect human genes
• discussion about labeling and tracing GM
• US strongly opposed to import restrictions
• Unwillingness to take problem to WTO
• US would probably win case, but lose publicity
  war
• standing of WTO may weaken if it makes unpopular
  decisions