Trade disputes

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Trade disputes

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One member government believes that another member government is violating an agreement or a commitment made to the WTO

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  1. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 Trade disputes WTO dispute settlement procedures Sanctions Examples 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 – “Unfair” antidumping levies – Non-tariff barriers – Administrative practices Note: initial antidumping determination purely national process Ari Kokko Ari Kokko 1
  2. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 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 Ari Kokko 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 Ari Kokko Ari Kokko 2
  3. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 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 Ari Kokko 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 Ari Kokko Ari Kokko 3
  4. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 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? Ari Kokko WTO disputes 1995-2004 (Dec) 324 cases reported to DSB 103 panel reports 64 appellate body decisions only 5 cases where retaliation has been authorized Ari Kokko Ari Kokko 4
  5. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 Retaliation authorized in 5 cases Foreign sales corporations – EU complaint about tax benefits to exports. Level of retaliation: USD 4,043 million. Implemented from March 2004. US Antidumping Act of 1916 – EU request to adopt similar system with “triple damages”. Airplane subsidies – Canadian complaint about Brazilian subsidies. Level of retaliation: CAD 344 million. Not yet implemented Ari Kokko 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, but calls for removal after EU rules revision in late 2003. Ari Kokko Ari Kokko 5
  6. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 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 Ari Kokko 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 Ari Kokko Ari Kokko 6
  7. Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 7 2006-2007 WTO dispute settlement Ecuador, Guatemala, Honduras, Mexico, and Panama file 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 Any similarities with Catfish case? Ari Kokko 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 Ari Kokko Ari Kokko 7
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