- The Washington Times - Thursday, November 14, 2002

Several high-profile setbacks for the United States at the World Trade Organization have brought the body's dispute-settlement process under increasing scrutiny in the past few months.
With more big cases coming including rulings on U.S. steel tariffs and Canadian lumber expected next year the process is likely to become an increasingly sensitive political issue.
"It's already an issue," said a source at the Senate Finance Committee, which oversees trade issues. "These decisions will raise its profile, maybe beyond anything else."
The dispute-settlement process could be changed as part of the latest round of worldwide trade negotiations designed to open markets. The United States pushed hard for the current rules-based system that some see as clearly benefiting America and others say is unfair.
So far, the won-lost record of the United States is mixed.
When other countries bring cases against the United States, the WTO has ruled in America's favor three times but has found some aspect of U.S. law or regulation out of sorts in 18 cases, said a U.S. trade official. When Americans have taken the offensive, they have won 16 cases, lost three and settled favorably 19, the official said.
"Overall, we've fared pretty well," said the official, who spoke on the condition of anonymity. "We've gained more than we've lost."
The United States took the offensive again last week when it requested dispute-settlement consultations with Venezuela, accusing the country of restricting trade of U.S. agricultural goods, notably corn, dairy products, grapes, poultry, beef, pork and soybean meal. If consultations do not work, the United States can ask the WTO to create a dispute-settlement panel.
When on the defensive, the losses often require minor changes to U.S. rules and regulations, the trade official said.
But some of the highest-profile cases have affected big U.S. industries, the U.S. tax code and the way Congress allocates money.
"I am deeply troubled about what has been going on in the WTO dispute-settlement process," Sen. Max Baucus, Montana Democrat and chairman of the Finance Committee, said during the run-up to the midterm elections. "These proceedings are looking more and more like a kangaroo court against U.S. trade law. This trend must stop."
Mr. Baucus highlighted a WTO ruling against a multibillion-dollar tax break on export earnings. The tax break benefits some of the United States' largest companies when they funnel export earnings through offshore, foreign-sales corporations, or FSCs. He also chided the WTO for finding against a law, known as the Byrd Amendment, that allocates revenue from some tariffs directly to U.S. companies. The Byrd Amendment is so named for its sponsor, Sen. Robert C. Byrd, West Virginia Democrat.
Other big cases include the U.S. imposition in March of tariffs up to 30 percent on steel imports and averaging 27 percent on Canadian lumber used to build houses. The WTO in June set up an arbitration panel to determine whether U.S. steel restrictions violated international rules, and was weighing the U.S. retaliation against Canadian lumber subsidies.
Others who have been involved with the dispute-settlement process see the WTO overreaching.
"They are creating rather than interpreting law," said John Ragosta, a lawyer with the firm Dewey Ballantine, who has worked on the Canadian lumber issue. "Personally, I support WTO dispute settlement. But I think it would be a shame if, through abuse of the system, it would ultimately undermine dispute settlement."
The first step in dispute resolution is consultations, where the plaintiff and defendant see if they can settle their differences. If that doesn't work, the complaining country can ask the WTO to appoint a dispute-settlement panel, which hears the cases of the two sides. If the panel decides the disputed trade measure violates WTO rules, the losing side can comply "in a reasonable time" or face sanctions. The entire process, including appeals, is supposed to take less than 15 months.
In Congress, perception of the rulings, and criticism of the WTO, may shake out along partisan lines.
"There have been a couple of cases that have amplified the dispute-settlement process, especially FSC," said a Republican Senate aide. "Some people may not like the ruling, but that does not mean it is wrong."
Foreign governments generally are satisfied with the system, but are proposing some changes.
"We have confidence in the system, but there is always room for improvement," said Bernie Etzinger, spokesman at the Canadian Embassy.
Some Europeans are concerned that the WTO system will suffer under the weight of the high-profile decisions.
"Both the U.S. and the [European Union] have weighed it down with some big issues," said a European government aide. "But everyone wants the system to work."
To fine-tune the system, the United States is proposing to open hearings to the public, mandating timely access to submissions and final panel reports, and setting guidelines for paperwork.
Mr. Baucus suggested an oversight panel made up of U.S. judges to review WTO decisions.
Despite its flaws, the United States benefits from the system, defenders say.
"In my judgment, the system is far superior to what it was," said Clayton Yeutter, U.S. trade representative under President Reagan. "It is by no means perfect. But I'd say the system is performing admirably."
While changes to the system could be healthy, Bill Frenzel, a visiting scholar at the Brookings Institution and a former Republican member of Congress from Minnesota, cautioned that the administration will have to pay attention to legislators' complaints.
"I expect the Senate and the House will weigh in with changes or conditions," Mr. Frenzel said.


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