U.S. alleges WTO exceeds its authority

Report seeks overhaul of how trade authority handles disputes

January 01, 2003|By BLOOMBERG NEWS

WASHINGTON - The United States is proposing an overhaul in the way World Trade Organization disputes are handled, after a string of American defeats at the Geneva-based arbiter on issues from steel-import tariffs to tax breaks for exporters.

The Bush administration, under pressure from Congress, is urging that dispute-settlement panels be open, that greater access be given to case arguments and rulings, and that outside parties be allowed more input. Congressional Democrats have complained that the WTO is overstepping its bounds in adjudicating trade rows.

A report released yesterday by the Commerce Department agreed that, in some cases brought against the United States, the WTO panels exceeded the authority granted by the 1994 agreement that set up the 144-nation organization.

"The WTO dispute-settlement system should not operate so as to impose upon members obligations to which they did not agree," the report said. "Aspects of several recent reports by WTO panels have departed" from the trade body's own rules.

The report cited a ruling against U.S. restrictions on lamb from Australia and New Zealand, charging that a WTO panel wanted the Americans to provide more proof than was required by the trade arbiter's rules that imports hurt domestic producers.

The United States lost a number of rulings in 2002, including one brought by the European Union against a $4 billion tax break for exporters such as Boeing Co. and Microsoft Corp., the largest case in the WTO's history.

That loss, coupled with other rulings against measures ranging from tariffs on unfairly traded steel to a law giving duties collected in unfair-trade cases to the companies that brought the actions, has caused concern among lawmakers.

Sen. Max Baucus, the Montana Democrat who recently headed the Senate Finance Committee, enshrined that concern in the "fast-track" law passed in August expanding President Bush's trade-negotiating powers.

The fast-track law mandates that U.S. negotiators take steps to rein in WTO arbiters and ensure that U.S. legal sovereignty is respected in rulings from Geneva.

The administration's report says the United States on balance has benefited from cases at the WTO.

"Dispute settlement has benefited a wide range of U.S. industries and their workers," the paper said, naming as beneficiaries auto and auto parts manufacturers and exporters, agricultural producers, processors and exporters, and holders of patents and other intellectual property protections.

Still, the report said the WTO has ruled against every U.S. "safeguard" action that has been brought since 1995. Safeguards are trade restrictions on imports that, while fairly traded, are overwhelming a domestic industry.

The steel tariffs of as much as 30 percent that Bush set in March were levied under the safeguard law. That action has been challenged by more than a dozen WTO members, and an initial ruling is due in the spring.

The report acknowledged that continued rulings against U.S. laws and practices might hamper the market-opening efforts under way at the WTO.

"If the perception develops that WTO panels are substituting their own policy judgment for a negotiated balance of rights and obligations, then it will be difficult to maintain the support and confidence of members and the public in the value of future negotiations," the document said.

To that end, the Bush administration said it will use the market-opening negotiations - scheduled to conclude by 2005 - to press for more openness, participation and proscription of WTO rulings.

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