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Trade disputes

Trade disputes WTO dispute settlement procedures Sanctions Examples Pressure valves / safeguards in GATT / WTO Countries may temporarily raise protection in extraordinary circumstances Balance-of-payments crises: to reduce excess imports

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Trade disputes

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  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. What’s 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 panel’s 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. EU:s 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 => 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

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