GAO

United States General Accounting Office

Report to the Chairman, Committee on

Ways and Means, House of

Representatives

August 2000 WORLD TRADE

ORGANIZATION

Issues in Dispute

Settlement

GAO/NSIAD-00-210

Page 1 GAO/NSIAD-00-210 International Trade

Contents

Letter 3

Appendixes Appendix I: Summaries of 42 World Trade Organization Dispute

Settlement Cases 30

Appendix II: Commercial Significance of 42 U.S. WTO Dispute

Settlement Cases 96

Appendix III: Objectives, Scope, and Methodology 107

Appendix IV: GAO Contact and Staff Acknowledgments 110

Glossary 112

Tables Table 1: Completed WTO Dispute Settlement Cases Involving

the United States, 1995 Through March 16, 2000 30

Table 2: Commercial Outcome of WTO Dispute Settlement Cases

Involving the United States, 1995 Through March 16, 2000 96

Table 3: Commercial Significance of Completed U.S. Cases in

the WTO, 1995-2000 98

Figures Figure 1: Flow Chart of WTO's Dispute Settlement Process 6

Figure 2: Areas Involved in 25 WTO Cases in Which the

United States Challenged Foreign Trade Practices 10

Figure 3: Areas Involved in 17 WTO Cases in Which Other

WTO Members Challenged the United States 12

Figure 4: Compliance With WTO Decisions in 42 Completed

U.S. Cases 22
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Abbreviations

ATC World Trade Organization Agreement on Textiles and Clothing

DSB Dispute Settlement Body

EU European Union

FSC Foreign sales corporation

GATT General Agreement on Tariffs and Trade

NAFTA North American Free Trade Agreement

TRIPS Agreement on Trade-Related Aspects of Intellectual Property

TRQ Tariff-rate quota

USTR Office of the U.S. Trade Representative

WTO World Trade Organization
Page 3 GAO/NSIAD-00-210 International Trade

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-285799 Letr

August 9, 2000

The Honorable Bill Archer

Chairman, Committee on Ways and Means

House of Representatives

Dear Mr. Chairman:

U.S. participation in the World Trade Organization (WTO) reached the

5-year mark in 2000. The WTO was established through the Uruguay Round

of international trade negotiations on January 1, 1995, replacing the

General Agreement on Tariffs and Trade. Membership in the WTO has

grown to 137 members, up from about 90 members in September 1986, at

the start of the Uruguay Round. The WTO provides the institutional

framework for the multilateral trading system, administers rules of

international trade, and provides a forum for conducting trade

negotiations. It also establishes a quasi-adjudicative dispute settlement

system, which has come to be seen as the linchpin for the rules-based

system of international trade. The WTO dispute settlement system has also

become a lightning rod for those concerned about the direction of the

trading system in an era of accelerating globalization.

This is the second report in response to your request that we conduct a

review of the WTO's dispute settlement system. Our first report provided

information on how WTO members have used the new system over the past

5 years.1 In this report, we examine (1) the outcome and commercial

impact of completed cases involving the United States and (2) the major

issues that have emerged in using the system. This report supplements the

observations we provided you on these issues in June 2000.

Results in Brief Overall, the results of the WTO's dispute settlement process have been

positive for the United States. Our examination of 42 completed cases

involving the United States shows that most led to changes in foreign laws,

1

See World Trade Organization: U.S. Experience to Date in Dispute Settlement System

(GAO/NSIAD/OGC-00-196BR, June 14, 2000). We also provided testimony on these issues:

see World Trade Organization: U.S. Experience in Dispute Settlement System: The First Five

Years (GAO/T-NSIAD/OGC-00-202, June 20, 2000).
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regulations, and practices that offer commercial benefits to the United

States. Conversely, none of the changes the United States has made in

response to WTO disputes have had major policy or commercial impact to

date, though the stakes in several were important. However, a ruling that

U.S. tax provisions violated export subsidy rules has potentially high

commercial consequences, but the United States has not fully determined

how to comply with the ruling. In addition, WTO rulings have upheld major

trade principles important to the United States, such as requirements that

imported goods must be treated in the same way as domestic goods in

applying internal taxes and regulations.

Four major issues surrounding the dispute settlement system have

emerged. These issues are (1) how the dispute settlement system has

affected U.S. sovereignty, (2) to what extent WTO members found to be in

violation of rules are complying with WTO rulings, (3) how quickly the

system resolves disputes, and (4) how open the WTO's proceedings are.

Concerns over sovereignty have centered on whether rulings would

weaken U.S. protections against unfair trade and on health, safety, and the

environment. So far, this possibility has not proved to be the case, but

concerns remain. With regard to compliance, members have generally

changed their practices to comply with WTO rules, and the rate of

compliance with decisions in U.S. cases is 75 percent, slightly better than

that under the General Agreement on Tariffs and Trade. Further, while

many U.S. complaints were resolved quickly, most complaints that went

through the WTO panel or appellate process took longer than called for in

the timetables set forth in the WTO agreements. Although the dispute

settlement system has become more open and transparent since it was

established in 1995, the public still has limited information about and input

into the organization's proceedings. The United States has met resistance

from other WTO members in seeking greater openness in the process.

Background The WTO provides the institutional framework for the multilateral trading

system. The WTO is the successor of the General Agreement on Tariffs and

Trade (GATT), which was created by post-World War II U.S. and European

leaders who believed that open markets and a rules-based system of trade

would promote international stability and prosperity and avoid damaging

trade disputes. The 1994 Uruguay Round agreements, which created the
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WTO, vastly expanded the scope of multilateral trade rules by

strengthening disciplines in traditional trade areas and broadening

coverage to areas such as services and intellectual property. It also

established a new dispute settlement system,2 replacing the procedures

that had gradually emerged under GATT. While the dispute settlement

system facilitates the resolution of specific trade disputes, it also serves as

a vehicle for upholding trade rules and preserving the rights and obligations

of WTO members under the WTO agreements. WTO dispute settlement is

central to U.S. efforts to monitor and enforce trade agreements—a major

focus of U.S. trade policy.

Unlike the GATT, the WTO dispute settlement system discourages

stalemate by not allowing parties to block decisions, and establishes a

standing Appellate Body, which helps make the system's decisions more

stable and predictable. WTO dispute settlement rules also set time limits

for each step in the dispute settlement process, including (1) consultations,

(2) panel review, (3) Appellate Body review, and (4) implementation of

rulings (see fig. 1). Under these timetables, some of which are maximums

and others minimums, WTO disputes that go all the way through the system

should be resolved within approximately 2-1/2 years from the time an initial

request for a consultation is filed through full implementation of a WTO

Appellate Body ruling—a minimum of 17 months for the consultation and

adjudication phases (if an appeal is involved) and up to 15 months to

implement the final ruling. The dispute settlement process is administered

by the Dispute Settlement Body (DSB), which is composed of

representatives of all WTO members.

2

The agreement that governs this system is formally titled the “Understanding on Rules and

Procedures Governing the Settlement of Disputes” and is generally referred to as the

Dispute Settlement Understanding.
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Figure 1: Flow Chart of WTO's Dispute Settlement Process

Source: GAO analysis.

Consultation Stage

• Member to member

• 60 days

If countries

involved

accept Panel's

ruling

Appellate Stage

• Appellate Body reviews Panel’s legal findings

• Report due within 60 to 90 days

Implementation Stage

Panel Review Stage

(if consultations fail)

• Dispute Settlement

Body establishes 3– to

5–Member Panel

• Review can last up to

9 Months

DSB adopts report(s)

If countries

involved

appeal Panel's

ruling

• Losing party must state its intention to comply within 30 days

• If compliance does not occur, losing party may compensate, or DSB may authorize 

retaliation

• If immediate compliance is impractical, member given a “reasonable period of time” 

to comply (which normally should not exceed 15 months from adoption of report)

• Arbitration available to determine reasonable period of time to comply or to set 

level of retaliation
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• Consultations. Before members take any other actions, the dispute

settlement process calls on member countries to try to resolve disputes

in discussions among themselves. Up to 60 days are typically allotted to

this initial stage, known as “consultations.”

• Panel adjudication. If the parties to a dispute cannot reach a satisfactory

resolution on their own, the complaining member is entitled to have an

impartial panel of experts convened on an ad hoc basis to adjudicate the

matter. The panel is composed of three, or by agreement of the parties,

five, well-qualified governmental or nongovernmental persons with

experience in the trade policy area. The WTO Secretariat proposes

candidates to the panel,3 and parties to the dispute may oppose

nominations only for compelling reasons. Panelists are normally

appointed by agreement of the parties and, once appointed, they serve

in their individual capacities, not as government representatives. The

panel phase may take 30 or more days for the panel to be appointed,

plus 6 to 9 months for the panel to issue its findings in report form.

Within 60 days, unless appealed or member countries decide by

consensus to reject it, the report becomes a WTO ruling.

• Appellate Body adjudication. Either side in a dispute can appeal the

panel's ruling. The seven members of the standing Appellate Body are

broadly drawn from WTO member countries and are to be people with

demonstrated expertise in law, international trade, and the WTO

agreements; three Appellate Body members consider each appeal.

Normally, the Appellate Body should complete its consideration of the

appeal within 60 to 90 days. The Appellate Body ruling, along with the

panel ruling, as amended, is then adopted by the WTO within 30 days,

unless member countries decide by consensus to reject it.

• Implementation. Within 30 days of the ruling's adoption, a country that

loses a case must state its intention regarding implementation of the

recommendations of the panel or appellate ruling. Losing parties are

encouraged to comply with WTO rulings. However, they may accept

retaliation or provide compensation to the plaintiff as an interim

measure. If complying with the recommendation proves immediately

impractical, the country may request or be given an extension for a

“reasonable period of time” to do so. This period is normally not to

exceed 15 months. The implementation period can be set by agreement

3

The WTO Secretariat, which provides technical and legal support to WTO bodies and

current and prospective members, maintains a list of governmental and nongovernmental

individuals nominated by WTO members as possessing the requisite qualifications from

which panelists may be drawn.
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to a date proposed by the losing party, by mutual agreement of the

parties, by binding arbitration or, in cases involving subsidies, by the

panel.

• Retaliation in the event of noncompliance. If a member found to be

violating WTO commitments does not conform to the WTO ruling or

provide compensation within the established implementation period,

the complaining party may seek authorization to retaliate. This shall be

granted within 30 days after the implementation period ends, unless

there is a consensus against doing so. Retaliation takes the form of

suspending negotiated concessions or other WTO obligations. For

example, a country could raise tariffs on the noncomplying country's

goods. The level of retaliation must also be authorized and is to be

equivalent to the amount of harm suffered by the complaining country.

In case of disagreement regarding the level of retaliation, the original

panel may be asked to arbitrate and issue a binding determination to be

completed within 60 days from the end of the implementation period.

Overall Positive U.S.

Results From Dispute

Settlement System

The United States has generally benefited from its experience with the

WTO dispute settlement system, based on our analysis. We examined 42

completed WTO dispute settlement cases in which the United States was

either plaintiff or defendant4 and focused on the nature of the case, the

commercial significance of the outcome, and the trade principles involved.

(See app. I for a brief description of each case.) The majority of the 25

cases in which the United States was the plaintiff resulted in commercial

benefits through greater market access or stronger intellectual property

protection. In the 17 cases in which the United States was a defendant, the

trade policy and commercial consequences of nearly all the challenges so

far have been limited. The exception is a European Union (EU) challenge

to the U.S. foreign sales corporation tax provisions (case 40), where the

WTO ruled that the U.S. provisions constituted a prohibited subsidy. The

United States has also benefited from WTO rulings that upheld important

principles set forth in the WTO agreements.

4

According to the Office of the U.S. Trade Representative (USTR), 42 cases involving the

United States had been resolved either through a panel ruling or Appellate Body decision, a

settlement between the parties, or some other resolution, from the WTO's inception in 1995

through mid-March 2000.
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The United States Has

Achieved Commercial

Benefits From Most of the

Cases It Has Filed

The United States has achieved benefits in most of the cases it has brought

to the WTO dispute settlement process. The United States brought 25 of the

42 completed cases we examined, primarily in the areas of agriculture and

sanitary and phytosanitary5 measures, intellectual property rights, and

taxes and subsidies (see fig. 2).

5

This refers to measures used to protect human, animal, and plant health. See Agricultural

Exports: U.S. Needs a More Integrated Approach to Address Sanitary/Phytosanitary Issues

(GAO/NSIAD-98-32, Dec. 11, 1997).
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Figure 2: Areas Involved in 25 WTO Cases in Which the United States Challenged

Foreign Trade Practices

Legend

Ag/SPS = Agriculture, and sanitary and phytosanitary measures (human, animal, and plant health)

IPR = Intellectual property rights (such as patent protection)

TRIMS = Trade-related investment measures (such as countries requiring that foreign firms limit their

imports to the amount they export).

Note 1: “Antidumping” refers to additional duties imposed on imports when dumping, or sales at below

home-market prices, is found.

Note 2: “Other” includes cases involving barriers in the Japanese film market, the EU's reclassification

of certain computer equipment for tariff purposes, and India's restrictions on imports it claimed were

based on balance-of-payments grounds.

Source: GAO analysis.

Of the 25 cases the United States filed with the WTO, 19 resulted in some

agreed change in foreign laws, regulations, or practices. These have

included removal of trade barriers, reductions in subsidies, and changes in

intellectual property laws. As appendix II shows, 14 of the 25 cases resulted

in commercial benefits for the United States.

0

1

2

3

4

5

6

7

8

Number of cases

Ag/SPS IPR Tax/Subsidies Textiles Antidumping Other TRIMS
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Implementation of the WTO panel ruling in four disputes upholding U.S.

complaints is either not yet complete or was contested. These four cases

involve EU restrictions on banana imports and imports of hormone-treated

beef, where compliance has not been attained;6 Australian subsidies to

automotive leather manufacturers, where compliance was disputed but

resolved through negotiations; and Mexican antidumping measures on high

fructose corn syrup, where Mexico has until September 22, 2000, to comply.

In two cases, the United States lost its challenge. Both cases involved

important markets for U.S. exports. In the Japanese film case (case 19), the

United States challenged Japanese government practices that it argued

fostered barriers to access and distribution of U.S. photographic film in

Japan's approximately $2.5 billion to $3 billion market. The WTO ruled

against the United States, finding that it had not demonstrated that Japan

had nullified and impaired U.S. benefits or violated specific WTO

commitments. In the second case, the EU increased tariffs on certain

computer equipment by changing the classification of these products

(case 27). At the time, U.S. producers accounted for half of the $5-billion

European market. The WTO ruled that the EU did not violate its obligations

by changing the classification of these products since its WTO

commitments did not specifically identify them in a particular tariff

category. However, the Information Technology Agreement reduced tariffs

on these products to zero, mitigating the impact of the adverse ruling.

Challenges Against the U.S.

Practices Have Had Limited

Impact to Date

Other WTO members challenged U.S. practices in 17 cases, primarily

involving antidumping, textiles, and the section 301 trade law7 (see fig. 3).

Of the 17, a WTO panel or the Appellate Body ruled against the United

States in 6 cases, in favor in 1 case, and in 10 cases the dispute was

resolved prior to a panel decision. As discussed in more detail later, the

changes to U.S. policy in response to these cases have been relatively

minor.

6

See discussion on compliance later in this report for information on compliance issues.

7

Section 301 of the 1974 Trade Act, codified at 19 U.S.C. § 2411, addresses foreign unfair

trade practices affecting U.S. exports of U.S. goods or services and intellectual property

protection.
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Figure 3: Areas Involved in 17 WTO Cases in Which Other WTO Members

Challenged the United States

Legend

Ag/SPS = Agriculture, and sanitary and phytosanitary measures (human, animal and plant health)

IPR = Intellectual property rights (such as patent protection)

TRIMS = Trade-related investment measures (such as countries requiring that foreign firms limit their

imports to the amount they export).

Note 1: Section 301 of the 1974 Trade Act addresses foreign unfair trade practices affecting U.S.

exports of goods or services, and intellectual property protection.

Note 2: “Antidumping” refers to additional duties imposed on imports when dumping, or sales at below

home-market prices, is found.

Note 3: “Other” includes an EU challenge to certain extraterritorial aspects of U.S. sanctions on Cuba.

Source: GAO analysis.

While some of the 17 cases have also had high commercial stakes, the

outcomes of all except one have had limited or no commercial effect. For

example, in a case challenging U.S. antidumping duties on imports of urea

(primarily used as a fertilizer) from the EU (case 28), the United States

removed the duties after it found that U.S. industry was not interested in

maintaining them. The one case with a potentially very high commercial

impact involves U.S. tax exemptions for foreign sales corporations

0

1

2

3

4

Antidumping Textiles Section 301 Ag/SPS Environment Tax/Subsidies Other

Number of cases
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(case 40). The WTO found that the exemptions were prohibited export

subsidies and violations of U.S. commitments. The United States has until

October 1, 2000, to comply with the WTO ruling, but has not yet fully

determined how it will implement it.

WTO Disputes Have

Reinforced Principles of

Trade Agreements

In the disputes involving the United States, WTO decisions upheld trade

principles important to the United States. These rulings in the WTO's first

5 years have helped to establish a more consistent interpretation of WTO

agreements and members' obligations and have reaffirmed long-standing

trade principles.8

• The United States successfully challenged India's quantitative

restrictions and import bans on 2,700 products that India justified under

WTO balance-of-payments provisions (case 35).9 The WTO panel and the

Appellate Body found that India's balance-of-payments situation did not

justify the measures, and India agreed to phase out these restrictions.

The decision is an important signal to other countries that the WTO will

not permit the inappropriate use of balance-of-payments provisions to

restrict trade, according to USTR.

• Another long-standing trade principle—national treatment—generally

requires that foreign goods should receive treatment no less favorable

than that accorded to domestic goods. Under this principle, the United

States successfully brought WTO challenges against both Japan's and

Korea's taxation of distilled spirits (cases 4 and 32). In both countries,

certain domestically produced liquor received significantly lower tax

treatment than other varieties that were primarily imported. The WTO

found that this treatment was discriminatory because the products were

either “like” or “directly competitive” with the domestic products. Both

countries complied with the decisions by equalizing their tax rates on

foreign and domestic distilled spirits. A case regarding Turkey's

differential taxes on foreign and domestic films also involved national

treatment issues (case 18). The U.S. film industry noted that Turkey is

the largest market for films in the Middle East, with 1999 revenues of

8

Although the rulings of WTO panels and the Appellate Body do not establish “precedents”

as do judicial rulings in the United States and other common law systems, decisions of the

panels and especially the Appellate Body do to some extent rely on previous rulings.

9

These provisions allow a WTO member to temporarily impose price or quantity restrictions

on imports when facing a serious decline or a low level of its monetary reserves in order to

increase its foreign currency holdings.
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$23 million. Turkey agreed to equalize its tax rates, and a U.S. film

industry association cited this successful resolution of the dispute as

useful in discussions with other countries with similar measures.

Even in cases in which the United States did not prevail, important trade

principles were upheld. In a case involving wool shirts from India (case 12),

for example, the WTO Appellate Body ruled that a U.S. import restraint was

improper but upheld the principle that the burden of showing that the

import restraint was inconsistent with WTO principles was on the

complaining party, which in this case was India.

Major Issues Arising in

Use of the WTO

Dispute Settlement

System

Several important concerns have emerged regarding the WTO dispute

settlement system. Some of these issues were identified during the

Uruguay Round negotiations.10 Other issues were identified by trade

experts and other interested parties based on experience during the first

5 years of WTO dispute settlement. They include (1) the question of how

the dispute settlement system has affected U.S. sovereignty, (2) the extent

to which members found to be in violation of WTO obligations are

complying with the WTO's rulings, (3) the timeliness of the system for

resolving disputes, and (4) the transparency of the WTO's proceedings.

Dispute Settlement System's

Impact on U.S. Sovereignty

The nature of the WTO dispute settlement system has been the subject of

long-standing concern about how its decisions will affect U.S. sovereignty.11

Our review of the 42 completed dispute settlement cases involving the

United States focused on sovereignty issues in three areas. We found

(1) the United States has benefited from protections that are built into the

WTO dispute settlement system and U.S. implementing legislation that

preserve the U.S.' flexibility in responding to WTO rulings; (2) the United

States has so far withstood challenges to the use of domestic trade law to

act against foreign unfair trade practices, although more are in the pipeline;

and (3) WTO rulings to date against U.S. environmental measures have not

weakened U.S. environmental protections, but environmental groups

10Issues identified during the Uruguay Round negotiations are discussed in The General

Agreement on Tariffs and Trade: Uruguay Round Final Act Should Produce Overall U.S.

Economic Gains (GAO/GGD-94-83A&B, July 29, 1994).

11Although the word “sovereignty” has varied meanings, as used in this report sovereignty

refers to how U.S. participation in the WTO dispute settlement system affects the U.S.

government's authority over its domestic and foreign actions.
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remain concerned over the impact of these rulings and the system's

capacity to handle such complaints.

Flexibility in Responding to WTO

Rulings Protects U.S.

Sovereignty

As an intergovernmental forum, the WTO makes rulings that are

fundamentally different in character from rulings by U.S. courts. The WTO

itself cannot “strike down” U.S. laws, as U.S. federal courts can, nor can it

require the United States to modify domestic laws, regulations, or policies,

such as its environmental laws, even if they conflict with WTO trade rules.

Instead, WTO rulings identify aspects of the WTO member's policy that

conflict with WTO rules and recommend that the member bring them into

conformity.

Under WTO dispute settlement rules, compliance is the preferred way of

responding to an adverse WTO ruling. However, a member may decide not

to comply and either offer equivalent compensation or face foreign

retaliation. These options, which are considered under the dispute

settlement rules to be temporary, were designed to protect sovereignty.

Another sovereignty protection is that both panels and the Appellate Body

are expressly prohibited from adding to or detracting from the rights and

obligations provided in the WTO agreements. An innovation that the United

States sought in the Uruguay Round—the establishment of a standing

Appellate Body—has proved to be an important check on the system

during the WTO's first 5 years, substantially revising panel rulings the

United States argued had raised sovereignty problems. For example, in the

Venezuela gas and shrimp-turtle cases (cases 1 and 25) that challenged U.S.

environmental regulations, the Appellate Body modified WTO panel rulings

that had, in the U.S. view, unacceptably limited the right of members to

take measures to protect the environment. The Appellate Body played a

similar role in the U.S. case against the EU's ban on hormone-treated beef

(case 8) when it affirmed that a member retains the right to set its own

levels of human health protection, provided that the member complies with

WTO requirements in promulgating measures to achieve that level.12

In joining the WTO, however, the United States committed itself to abide by

the WTO rules. The United States played a major role in shaping those rules

12Specifically, the requirements of the WTO Agreement on the Application of Sanitary and

Phytosanitary Measures. U.S. consumer and health groups are concerned that these

requirements and their interpretation by dispute panels could affect regulators in taking

action against perceived health risks.
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through its active participation in eight rounds of multilateral trade

negotiations over a 50-year period. These and any new WTO rules are only

established after a consensus is reached among WTO member governments

to do so. The United States maintains that it has the right not to comply

with WTO rulings. However, the United States recognizes that it may bear a

penalty for not complying with WTO rulings, both in the form of retaliatory

duties on U.S. exports and in terms of its reputation as a key player in the

world trading system.

WTO dispute settlement rulings against the United States are not

implemented unless and until Congress or the executive branch takes

action to do so through legislation, regulation, or other administrative

processes.13 USTR is required to consult with Congress, statutory private

sector trade advisory committees, and state officials before U.S. agencies

can make changes in U.S. agency regulations or practices in response to a

WTO ruling. The head of the relevant agency must also provide an

opportunity for public comment.14

As a result of the 17 WTO cases against the United States, one U.S. law, two

regulations, and one set of guidelines have been changed. To date, the

changes have been relatively minor. For example, in May of this year, the

United States amended a 1996 law for determining the country of origin of

U.S. textile and apparel imports, in response to a WTO case filed by the EU

(case 31). The amendment changed the country of origin of certain fabrics

including silk, and of certain goods such as scarves, from where the raw

fabric was made to where the product was both dyed and printed with two

additional finishing operations.15 According to Department of Commerce

statistics, the affected EU exports to the United States are relatively small.

WTO Cases Challenging U.S.

Domestic Trade Law

In implementing the Uruguay Round agreements, Congress sought

assurance that the WTO's new dispute settlement mechanism would not

13Section 102(a)(1) of the Uruguay Round Agreements Act, 19 U.S.C. § 3512 (a)(1) states that

“[n]o provision of any of the Uruguay Round Agreements, nor the application of any such

provision to any person or circumstance, that is inconsistent with any law of the United

States shall have effect.” Section 102(c) precludes private actions challenging U.S. laws or

governmental actions as being inconsistent with the Uruguay Round agreements.

14Sec. 102 (b) and § 123 (f) and (g) of the Uruguay Round Agreements Act, 19 U.S.C. §§

3512(b), 3533 (f) and (g).

1522 U.S.C. § 3592(b)(2) was amended by a provision in the Trade and Development Act of

2000 (P. L. 106-200, § 405).
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undermine U.S. ability to act against foreign unfair trade practices,

particularly under section 301 of the Trade Act of 1974 and under statutes

designed to counter foreign subsidies or dumping (sales of products abroad

at prices below those charged in the home market).

Despite three WTO complaints involving section 301,16 the United States

has continued to use the law to address foreign trade barriers. The average

number of section 301 investigations that the United States initiated

actually increased from 1995 through 1998 compared to the previous

5 years.17 However, the United States is referring significantly more cases to

the WTO for resolution now as compared to the 1990 through 1994 period.18

These cases often involve new trading rules, such as those on intellectual

property, agricultural subsidies, and trade-related investment. Three

challenges of U.S. section 301 actions have been brought before the WTO,

but only one resulted in a WTO ruling, which upheld the ability of the

United States to use the law consistent with WTO requirements.

• A challenge launched just shortly after the WTO began operating

involved a request by Japan for WTO consultations in response to a U.S.

announcement of retaliatory duties under section 301 on $5.9 billion

worth of Japanese auto imports (case 3). Japan questioned the U.S.

action's consistency with WTO rules since the United States acted

without WTO authorization, but a bilateral deal was reached on the day

set for the United States to actually impose the duties, and Japan did not

pursue the matter further in the WTO.

• The EU made a largely unsuccessful challenge against U.S. section 301

and related provisions, alleging that aspects of the U.S. legislation

effectively required the USTR to make decisions about foreign trade

barriers before a WTO determination on whether a foreign trade

practice had violated WTO rules or whether retaliation was warranted

(case 42). The WTO panel found that though on its face the statute

conflicted with WTO requirements, it did not violate WTO rules

16Three of the 42 cases we examined involved complaints over U.S. section 301.

17The average of 5.5 cases in the 1995 through 1998 period is also higher than the 4.8 average

during the entire 1975 through 1994 period.

18During 1990-94, only 3 of 16 section 301 cases were referred to the GATT for resolution;

during 1995-99, 15 of the 24 section 301 cases were referred to the WTO for resolution.
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because of U.S. assurances that the United States would abide by WTO

timetables and decisions in implementing the law.19

Only one of the four cases against U.S. antidumping measures resulted in a

WTO ruling, and none of the cases against U.S. antidumping measures were

seen as resulting in weakened U.S. protections. In the case involving a

ruling, Korea challenged a U.S. Department of Commerce decision not to

revoke an antidumping order on semiconductors (case 36). The WTO panel

rejected almost all of Korea’s arguments. However, it ruled against the

United States on one of the Korean complaints. In response to this panel

ruling, Commerce modified one of its antidumping order review

procedures. After completing a review under the new procedures,

Commerce determined that the antidumping duties should remain in effect.

According to Commerce officials, the change in procedures does not

weaken the U.S. antidumping regime.

A number of challenges to U.S. antidumping and countervailing duties

(tariffs levied to offset government export subsidies) that were beyond the

scope of our study are in the pipeline, mostly in the steel sector. However, it

is too early to predict the commercial or policy consequences of these

cases for U.S. sovereignty. The pending challenges include challenges to

U.S. antidumping measures on imports of Korean stainless steel and

Japanese hot rolled steel, a U.S. countervailing duty action against lead bar

and steel imports from the United Kingdom, and challenges by the EU and

Japan to the 1916 Antidumping Act,20 which provides for antitrust-like

remedies (treble damages) against price underselling of foreign goods.

WTO Cases Involving U.S.

Health, Safety, and

Environmental Measures

Concerns have also been expressed by Members of Congress, some legal

experts, and interest groups that the WTO dispute settlement system may

interfere with the U.S.' ability to set and enforce health, safety, and

environmental measures. Such concerns surfaced in two U.S. cases dealing

with environmental issues, both of which the United States lost.

WTO members may claim exceptions to WTO rules in certain

circumstances to set and enforce health, safety, and environmental

measures. These exceptions, found in GATT article XX, protect U.S.

19The panel stated that if the United States repudiated its assurances, its conclusions that

these provisions were consistent with U.S. WTO obligations would no longer be warranted.

2015 U.S.C. § 72.
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sovereignty. When WTO members challenged two U.S. environmental

measures as discriminatory, the United States acknowledged that it treated

foreign products differently but said these differences were based on valid

policy concerns, not disguised protectionism. Specifically, the United

States argued as follows:

• In the gasoline imports case brought in 1995 against the United States by

Venezuela and Brazil (case 1), the United States said that the

Environmental Protection Agency was concerned that it would be

difficult to enforce the same rules for gasoline domestic products and

imports in setting baselines, which are used to assess refiners'

performance in meeting the goals of the 1990 Clean Air Act.21

• In the 1996 shrimp-turtle case brought by four Asian countries, the

United States argued (case 25) that shrimp trawling was among the

leading factors driving sea turtles to the brink of extinction. The United

States noted that the U.S. law in question22 was designed to encourage

nations to require comprehensive use of turtle extruder devices, which

reduce turtle deaths. Since not all nations had adopted such

requirements, the United States banned imports of shrimp from those

that had not.

Despite the U.S. arguments in these cases, the WTO ruled that the U.S.

measures violated WTO obligations. Nevertheless, the U.S. environmental

objectives were maintained.

• First, the WTO Appellate Body found the U.S. measures were eligible for

one of the exceptions enumerated in article XX, after the initial panel

had ruled they were not. This means that the United States is allowed to

take these kinds of trade measures to attain its U.S. environmental

objectives of conserving air quality and protecting sea turtles and still

meet its WTO obligations, so long as they are consistent with the

introductory clause of article XX. The clause requires that measures not

be a means of arbitrary or unjustifiable discrimination or a disguised

restriction on international trade.

• Second, the United States was ultimately able to comply with the WTO

rulings by making changes in the way the affected laws are

2142 U.S.C. § 7545(k).

22Section 609 was one of the general provisions in the fiscal year 1990 Departments of

Commerce, Justice, and State Appropriations Act, Public Law 101-162, 16 U.S.C. § 1537 note.
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administered. Agency officials say these changes do not compromise

their environmental objectives. In a case brought by Venezuela and

Brazil (case 1), the Environmental Protection Agency changed a

regulation implementing the 1990 Clean Air Act pertaining to the

cleanliness of conventional gasoline in 1997. The change gives foreign

suppliers the option of using a baseline for calculating gas cleanliness,

based on their own performance rather than on an agency-established

baseline (this treatment was already afforded to domestic suppliers).

The Environmental Protection Agency also put in place a mechanism to

offset any deterioration in the overall cleanliness of gas imports. In the

shrimp-turtle case, the United States took steps to make the process it

uses to certify that countries have comprehensive sea turtle

conservation programs fairer and more open. It also began pursuing

negotiations with countries toward adoption of multilaterally

agreed-upon sea turtle conservation measures. However, environmental

groups are still concerned about another change in U.S. guidelines made

during the shrimp-turtle case that allows shrimp to be imported into the

United States from countries that do not have comprehensive turtle

conservation requirements.23

Beyond the outcome of these specific cases, concerns remain about the

dispute settlement system's capacity to deal with complex regulatory

issues. Dispute settlement cases involving health, safety, and

environmental matters necessitate that WTO panels balance trade against

other concerns and weigh scientific and technical evidence. This raises two

issues: (1) whether the WTO is the appropriate forum for such decisions

and (2) whether the WTO is adequately equipped to make such decisions.

Regarding the first issue, some U.S. health, consumer, and environmental

organizations say that decisions involving balancing trade with other

concerns are inherent policy choices best made by national governments

and their citizens, not the WTO. In this regard, some maintain that as an

organization dedicated to reducing trade barriers, the WTO cannot

impartially address issues that involve policy goals that may conflict with

23The Department of State implemented this particular change in guidelines just prior to the

WTO Appellate Body's ruling on the case, and environmental groups say it weakens

protection of sea turtles. State is periodically reviewing whether the change in guidelines is

causing nations to abandon comprehensive conservation programs. So far this has not been

the case. Brazil and Australia are the only countries permitted shipment-by-shipment entry.

In addition, Thailand has been certified as having a comprehensive conservation program,

and Pakistan has just received U.S. certification. Nevertheless, State's change in guidelines

is currently being challenged in the U.S. courts by U.S. environmental groups and a

preliminary ruling against State has been issued.
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free trade. For example, some consumer and environmental groups

maintain that WTO dispute settlement panels in these U.S. cases did not

show sufficient deference to domestic regulators' enforcement concerns.

Regarding the second issue, there is concern that WTO panels, which are

generally composed of trade officials, may lack or fail to seek the scientific

and other technical expertise needed to fully evaluate complaints over

complex factual matters such as health risks or alternative means of

attaining regulatory goals.24 While U.S. courts are often asked to review

such issues, some nongovernmental organizations and legal experts say

U.S. courts are better equipped to do so than the WTO dispute settlement

process, which in their view lacks sufficient procedural protections to

ensure impartiality and due process.

Members Generally

Complying With WTO

Rulings, but Some Problems

Remain

Compliance with WTO rulings has generally been achieved in the 42

completed cases we examined. In 4 cases, however, it has been alleged by

the complaining countries that some countries, including the United States,

have failed to fully comply with the WTO rulings. In other cases, countries

have complied with the rulings in ways that provide limited improvements

in market access. The United States has proposed changes to improve

compliance with WTO rulings.

In disputes involving the United States, WTO members have complied with

WTO rulings about 75 percent of the time (see fig. 4). This is somewhat

better than the overall rate of member compliance with WTO rulings

(65 percent). It is also better than the average rate of full compliance under

the GATT dispute settlement mechanism during its first 40 years of

operation (67 percent).25

24The dispute settlement understanding permits panels to consult with experts, and panels

have done so in some cases.

25See Robert E. Hudec, Enforcing International Trade Law (New Hampshire: Butterworth

Legal Publishers, 1993), p. 290, table 11.10 and table 11.3, and pp. 278-79.
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Figure 4: Compliance With WTO Decisions in 42 Completed U.S. Cases

Source: GAO analysis.

Failure to comply with the WTO ruling was alleged to have occurred in four

of the cases we examined. First, U.S. compliance is currently being

contested in a case involving a U.S. antidumping order on Korean

semiconductors (case 36). Although the United States changed its

antidumping procedures as a result of the WTO panel ruling, Korea claims

the change does not fully comply with the ruling. Second, the EU chose not

to lift its ban on beef treated with growth hormones to comply with WTO

rules and instead accepted retaliation (case 8). Third, in a case involving

42 Cases Completed as of March 2000

(United States as Either Defendant or Plaintiff)

42 Cases Completed as of March 2000

(United States as Either Defendant or Plaintiff)

22 Cases Went to Panel or Appellate Body for a Decision 22 Cases Went to Panel or Appellate Body for a Decision

3 Cases - - Defendant Won

(No compliance required)

3 Cases - - Defendant Won

(No compliance required)

3 Cases - - Plaintiff Recently Won

(Deadline for compliance has not passed)

3 Cases - - Plaintiff Recently Won

(Deadline for compliance has not passed)

16 Cases -- Plaintiff Won

(Compliance with ruling requested)

16 Cases -- Plaintiff Won

(Compliance with ruling requested)

12 Cases - Compliance Attained or Being Implemented 12 Cases - Compliance Attained or Being Implemented

3 Cases - Compliance Not Attained 3 Cases - Compliance Not Attained

1 Case - Compliance Being Contested (Korean semiconductors) 1 Case - Compliance Being Contested (Korean semiconductors)
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the EU's banana import regime (case 6), the WTO subsequently authorized

the United States to retaliate.26 Fourth, in a case brought by the United

States against Australian subsidies to an automotive leather manufacturer

(case 24), the WTO panel ruled that Australia had not complied with its

ruling, but the United States and Australia reached a negotiated solution.

Compliance with WTO panel rulings does not always guarantee the desired

outcome, because WTO members can sometimes comply with WTO rulings

in ways that remove discrimination but do not liberalize market access. In

the 1997 Korean liquor tax case (case 32), for example, Korea equalized

barriers, rather than lowering them, by raising taxes on its domestic

products to the level of taxes on imports. In the case involving Canada's

restrictions on imports of U.S. magazines (case 10), Canada complied with

the ruling but then introduced legislation that, if enacted, would have

placed new restrictions on advertising by foreign magazine publishers.

Canada and the United States ultimately resolved the dispute through

additional bilateral negotiations that resulted in an agreement easing the

Canadian restrictions and lowering other barriers.

U.S. proposals to improve compliance with WTO rulings include clarifying

procedural ambiguities and allowing more aggressive U.S. retaliation in

cases where compliance is not attained.

• The United States and other WTO members are considering procedural

changes to the agreement establishing the dispute settlement

mechanism to avoid a situation in which the timing of authorization to

retaliate and the review of the sufficiency of compliance measures may

26As a result of the EU's failure to comply with WTO rulings on the EU's ban on

hormone-treated beef and the EU banana import regime, the United States was authorized

to impose trade restrictions on $308 million worth of annual U.S. imports from the EU.
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be in conflict,27 an issue that arose in the EU banana regime case.28 In

the meantime, procedural ambiguities about the timing of these

procedures have generally been resolved by agreement among the

parties to disputes.29

• The Trade and Development Act of 200030 requires the U.S. Trade

Representative to periodically rotate the list of products subject to

retaliation if implementation of a WTO ruling is not imminent.31 U.S.

legislators introduced this provision in the act, referred to as a

“carousel,” because initial U.S. retaliation failed to prompt the EU to

comply with WTO rulings on the EU's ban on hormone-treated beef and

EU banana regime cases. The U.S. Trade Representative is considering

changes to the U.S. retaliation list in both cases to meet the provisions

of the act. However, the EU has recently questioned the carousel

provision's consistency with U.S. WTO obligations by requesting WTO

dispute settlement consultations with the United States.

Ultimately, compliance with WTO dispute settlement procedures must be

evaluated on a relative scale, since compliance cannot be mandated, and

retaliation cannot necessarily compel countries to change. Indeed, some

business and consumer interests question the wisdom of U.S. retaliation,

because it restricts trade and hurts consumers. At a more fundamental

27Article 21 of the WTO Dispute Settlement Understanding states explicitly that any

disagreement about the sufficiency of implementation measures must be resolved through

dispute settlement procedures. On the other hand, article 22 sets specific deadlines for

requesting and receiving authorization to retaliate, deadlines that could be missed if the

review of the sufficiency of compliance measures is still ongoing.

28This occurred in the EU banana import regime dispute where the EU attempted to block

U.S. efforts to take retaliatory measures, insisting that the procedure for authorizing

retaliation can only occur after a review of the sufficiency of compliance measures and must

involve a whole new panel proceeding. Subsequently, a WTO dispute settlement panel

indicated that an entirely new panel proceeding was not required and that the panel

determining the amount of retaliation can also assess the sufficiency of the compliance

measures.

29For example, the United States challenged Australia's compliance with the automotive

leather export subsidy decision; the parties agreed to reconvene the original panel to review

Australian compliance. Also, the United States and Malaysia agreed on how to proceed if

efforts to resolve Malaysia's concerns over U.S. implementation of the shrimp-turtle ruling

fail.

30Public Law 106-200, 114 Stat. 251, § 407.

31Rotation of products is intended to subject more products to higher duties and increase

uncertainty, thereby providing a greater incentive for compliance.
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level, most legal experts say it is unrealistic to expect the system to

produce 100 percent compliance, given its design. Several international

legal experts suggested to us that diplomacy offers the best hope of

resolution of politically sensitive disputes as was done, for example, in the

case of the EU challenge to the U.S. Helms-Burton law, which codified U.S.

economic sanctions against Cuba (case 16). They also said that retaining

the option of noncompliance (through acceptance of retaliation or

provision of compensation) is an important safety valve for broader

acceptance of the WTO's essentially automatic dispute settlement system.

Timeliness of the WTO

Dispute Settlement System

While WTO disputes have generally been resolved within several months of

the established timetables,32 the timeliness of WTO dispute resolution

remains a concern to U.S. businesses interested in achieving the negotiated

benefits of the WTO agreements. Although many U.S. complaints were

settled quickly, of the 15 U.S. complaints we examined that went to

adjudication, about 80 percent are taking longer than the established

timetables call for. However, the time given countries to implement WTO

rulings is generally within established guidelines.

• Many of the U.S. cases—20 of 42—have been resolved quickly by the

parties to the dispute. For example, all but one (India patent

mailbox-case 21) of the five intellectual property rights cases were

resolved without resort to a panel. On average, the 10 cases the United

States initiated that were resolved prior to a panel ruling took about 11

months to resolve. The 10 cases brought against the United States that

were resolved prior to a panel ruling were resolved even faster—4

months on average.

• The 15 cases the United States filed that went to panel and/or appellate

adjudication resulted in adoption of final WTO rulings within an average

of 21 months of the date of the initial U.S. request for consultations. This

is longer than the 17 months in the agreed timetables for the

consultation and adjudication processes. Only 3 of the 15 U.S. cases

resulted in a ruling within 17 months. Difficult cases, such as those

involving the India balance-of-payments situation, Canada's dairy

subsidies and quotas, and the EU's ban on hormone-treated beef, took

considerably more time (between 24 to 27 months). For cases brought

32Terence P. Stewart and Amy Ann Karpel, Review of the Dispute Settlement Understanding:

Operation of Panels, paper presented at American Bar Association Symposium on The First

Five Years of the WTO (Washington, D.C.: Jan. 20-21, 2000).
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against the United States, the timing was closer to the timetables, with

rulings in 19 months on average.

• The time provided for WTO members to implement final WTO dispute

settlement rulings in most cases has fallen well within WTO guidelines

of 15 months. It ranged from as little as 3 months in the Australia leather

case (case 24), to 8 months for a case involving Argentina's restrictions

on imports of textiles, apparel, and footwear (case 23) and for the Korea

semiconductors case (case 36), to 65 months for a case (case 4)

involving Japan liquor taxes (the United States secured concessions for

agreeing to this extended implementation period). For the cases we

examined, an implementation period of between 9 to 15 months was

typical. Only 2 of the 15 cases involved implementation periods in

excess of 15 months (Japan liquor taxes and India balance-ofpayments). In rulings against the United States, the implementation

period was 6 months on average, with none longer than 15 months.

USTR officials said that several factors affect the dispute settlement

system's timeliness. For example, cases are slowed down by the

unavailability of panelists and the need for translation of documents. In

addition, on occasion the complainants themselves seek additional time to

prepare their cases.

Transparency of WTO

Proceedings

WTO dispute settlement decisions can have far-reaching effects, but

information about and input into WTO proceedings is limited. The WTO

dispute settlement system was established as a forum to resolve disputes

between WTO member governments. Governmental parties to the dispute

have certain rights, including the right to be heard, to receive and submit

documents at prescribed intervals, to comment on draft panel reports, and

to appeal panel decisions. However, unless they are recognized third

parties in the case, other WTO members have no rights to participate in

proceedings or to submit or receive documents, nor do other international

organizations, nongovernmental organizations, local governments, and

private persons. Members generally do not make their submissions to

panels and the Appellate Body public, outside parties cannot observe or

participate in proceedings, and transcripts are not prepared or made

publicly available. Numerous U.S. officials, legal experts, business

representatives, and interest groups say the secrecy that attends WTO

dispute settlement proceedings undermines its legitimacy.

Some progress has been made in opening the system. As a result of a 1996

WTO decision, panel and Appellate Body reports are now released to the
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public immediately upon release to all WTO members. In several recent

cases, key submissions of arguments by each party have been released to

the public by mutual agreement among the parties to the dispute. Outside

counsel are now permitted to attend WTO proceedings if they are made

part of a disputing parties' delegation by that government. Moreover, in the

shrimp-turtle case, the WTO Appellate Body decided that dispute

settlement panels had the authority to consider the submission of amicus

curiae or “friend of the court” legal briefs even if the briefs were not

requested by the panel. In the recent WTO decision involving lead bar from

the United Kingdom, the Appellate Body stated that individuals and

organizations have no legal right to make submissions or to be heard by the

Appellate Body but found that the Appellate Body has the legal authority to

accept and consider amicus curiae briefs.

The United States has proposed additional steps at the WTO to improve

transparency and has done some things on its own to give affected U.S.

interests indirect access to the dispute settlement process. The Uruguay

Round Agreements Act set forth procedural requirements to foster

transparency and consultation with domestic stakeholders during WTO

dispute settlement proceedings, including statutory trade advisory

committees.33 Recently, USTR instituted the practice of publishing a

Federal Register notice whenever it initiates or is subject to WTO

consultations, providing an opportunity for public input at an earlier stage.

The commercial and public interest groups we consulted felt that full and

timely consultation with domestic stakeholders was critical to effective

U.S. participation in WTO dispute settlement. The U.S. government was

praised for taking steps to improve public participation and domestic

consultations, but some said formal and informal mechanisms still need

improvement. For example, several nongovernmental organizations said

the statutory trade advisory mechanism as currently structured does not

fully represent all the U.S. interests that could be affected by WTO

decisions and that wider consultation prior to initiating cases was

desirable. Within the WTO, the United States has proposed opening up

panel proceedings to observation by outside parties, making legal briefs

3319 U.S.C. §§ 3533, 3537. These include requirements for USTR to (1) consult with

appropriate congressional Committees (defined in the law as the House Ways and Means

and Senate Finance Committees), the petitioner, and relevant formal private sector advisory

committees; (2) consider the views of interested private sector and nongovernmental

organizations; and (3) publish a Federal Register notice soliciting public comments

whenever the United States requests or receives a request for establishment of a WTO

dispute settlement panel or is subject to an adverse dispute settlement ruling.
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and other panel submissions public, permitting submission of amicus

curiae briefs, and obtaining earlier public release of panel reports. USTR is

also seeking more timely compliance with a WTO requirement for parties

to provide nonconfidential summaries of submissions upon request.

However, the United States faces outright opposition or limited support

from most other WTO members to opening the WTO dispute settlement

process further. At the root of this resistance is disagreement among WTO

members over whether the dispute settlement process is an adjudicative

one, where court-like transparency protections may be appropriate, or an

intergovernmental conciliation mechanism, where confidential discussions

are more typical. WTO members also disagree on the merits of greater

openness in fostering full and impartial consideration of relevant issues.

Many members say the WTO should retain its character as a strictly

government-to-government forum and warn that there is a danger of

overloading the system and subjecting it to interest group pressures more

appropriately channeled through members' own domestic political

mechanisms. There is also some concern that allowing outside participants

may give developed countries an advantage over less developed countries,

given their greater resources.

Agency Comments and

Our Evaluation

We obtained oral comments on a draft of this report from the Assistant

USTR for Monitoring and Enforcement, who also included comments from

USTR's Offices of General Counsel, WTO and Multilateral Affairs, and the

Chief Economist. USTR officials generally agreed with the information in

the report and provided technical comments that we incorporated as

appropriate.

We are sending copies of this report to appropriate congressional

committees. We are also sending copies of this report to the Honorable

Charlene Barshefsky, U.S. Trade Representative. Copies will be made

available to others upon request.
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If you or your staff have any questions about this report, please contact me

on (202) 512-4128. Another GAO contact and staff acknowledgments are

listed in appendix IV.

Sincerely yours,

Susan S. Westin, Associate Director

International Relations and Trade Issues
Page 30 GAO/NSIAD-00-210 International Trade

Appendix I

Summaries of 42 World Trade Organization Apendxies

Dispute Settlement Cases ApendxiI

The United States has been involved in 42 dispute settlement cases that

have reached a conclusion from the World Trade Organization's (WTO)

inception in 1995 through March 16, 2000, according to the U.S. Trade

Representative (USTR). All the cases began with a request by a WTO

member for consultations about an alleged violation of WTO obligations as

set forth in the WTO agreements or accession documents. The cases then

followed different paths through the dispute settlement system. Some were

resolved before formal consultations took place. About half of the cases

went to a WTO panel for adjudication. Table 1 lists the cases in

chronological order. It is followed by a brief summary of each case that

includes information on the case's outcome, major issues, resolution, and

actions taken to comply with panel rulings.

Table 1: Completed WTO Dispute Settlement Cases Involving the United States, 1995 Through March 16, 2000

GAO case

number Case name

WTO dispute

numbera

Date of request for

consultation

1 U.S. regulations affecting gasoline imports DS-2 01/24/95

2 Korea's agricultural shelf-life standards DS-5 05/03/95

3 U.S. import duties on automobiles from Japan DS-6 05/17/95

4 Japan's taxes on distilled spirits DS-11 07/07/95

5 European Union grain tariffs DS-13 07/19/95

6 European Union banana import regime DS-16 09/28/95

7 U.S. underwear import restraint DS-24 12/22/95

8 European Union ban on meat from hormone-treated animals DS-26 01/26/96

9 Japan sound recordings DS-28 02/09/96

10 Canada's measures on magazines DS-31 03/11/96

11 U.S. wool coat import restraint DS-32 03/14/96

12 U.S. wool shirt import restraint DS-33 03/14/96

13 Hungary's agricultural export subsidies DS-35 03/27/96

14 Pakistan patent mailbox provision DS-36 04/30/96

15 Portugal patent protection DS-37 04/30/96

16 U.S. Helms-Burton Act DS-38 05/03/96

17 U.S. tariff retaliation on European Union products DS-39 04/17/96

18 Turkey's taxation of foreign films DS-43 06/12/96

19 Japan's import measures affecting film DS-44 06/13/96

20 U.S. antidumpingb investigation on Mexican tomatoes DS-49 07/01/96

21 India patent mailbox provision DS-50 07/02/96

22 Brazil's automobile regime DS-52 08/09/96
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 31 GAO/NSIAD-00-210 International Trade

a

The WTO's internet site, www.wto.org , maintains official records on all dispute settlement cases. The

site can be used to search for information on these cases using the WTO's case identification number,

which is included in this column.

b

Antidumping duties are imposed on imports to neutralize the injurious effect of unfair pricing practices

known as “dumping.”

c

A tariff-rate quota is the application of a lower tariff rate for a specified quantity of imported goods.

Imports above this specified quantity face a higher tariff rate.

Source: GAO analysis.

23 Argentina duties on textiles, apparel, and footwear DS-56 10/04/96

24 Australia automotive leather export subsidies DS-57 10/07/96

25 U.S. ban on shrimp imports to protect turtles DS-58 10/08/96

26 Indonesia automobile and auto parts measures DS-59 10/08/96

27 European Union customs classification of computer equipment DS-62 11/08/96

28 U.S. antidumping order on urea DS-63 11/28/96

29 Philippines pork and poultry tariff-rate quotasc DS-74 04/01/97

30 Japan's measures affecting fruit imports DS-76 04/07/97

31 U.S. textiles and apparel rules of origin DS-85 05/22/97

32 Korea's taxes on distilled spirits DS-84 05/23/97

33 Sweden's civil procedures for intellectual property DS-86 05/28/97

34 U.S. antidumping order on color television receivers DS-89 07/10/97

35 India's quantitative import restrictions DS-90 07/15/97

36 U.S. antidumping order on Korean semiconductors DS-99 08/14/97

37 U.S. ban on imports of European poultry DS-100 08/18/97

38 Mexico's antidumping determination on high fructose corn syrup DS-101 09/04/97

39 Canada dairy subsidies and quotas DS-103 10/08/97

40 U.S. tax treatment for foreign sales corporations DS-108 11/18/97

41 U.S. imports of Canadian cattle, swine, and grain DS-144 09/25/98

42 Provisions of the U.S. Trade Act of 1974 DS-152 11/25/98

(Continued From Previous Page)

GAO case

number Case name

WTO dispute

numbera

Date of request for

consultation
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 32 GAO/NSIAD-00-210 International Trade

Case 1: U.S.

Regulations Affecting

Gasoline Imports

Parties

Plaintiffs: Venezuela, Brazil

Defendant: United States

Outcome

• Both the WTO panel and the Appellate Body ruled against the United

States. The United States then modified its regulations to come into

compliance with the ruling.

Major Case Issues

• U.S. regulations implementing 1990 Clean Air Act amendments were

challenged in the WTO as disadvantageous to foreign suppliers in

contravention of WTO rules. Venezuela and Brazil said that several

aspects of a U.S. rule involving the cleanliness of gasoline were

discriminatory, particularly the fact that foreign suppliers were assigned

a statutory baseline whereas domestic suppliers had individual

baselines based on their refineries' own performance in 1990. Venezuela

and Brazil said the rule was not necessary because the United States had

less trade-restrictive means to achieve its objectives.

• The U.S. government recognized that foreign and domestic products

were not treated identically but argued that the treatment qualified for

WTO exceptions because it was necessary to protect human, animal,

and plant health and related to conservation of a natural resource, clean

air. The United States argued that alternatives to the measure were

impractical because of unavailability of data, enforcement problems,

and the possibility of adverse environmental consequences.

Case Resolution

• The panel found that the less favorable aspects of the gasoline rule were

not necessary and not directly related to improving U.S. air quality, and

thus could not be justified.

• The United States appealed the panel ruling, stating that the panel's legal

interpretation of the WTO exception for conservation was

inappropriately narrow. The Appellate Body agreed with the United

States on this important point of principle; however, it found the U.S.

measure was applied in an unjustifiably discriminatory manner and

constituted a disguised restriction on trade. Specifically, it found that
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the U.S. government had not sought to overcome administrative

problems with allowing foreign refiners to establish individual baselines

and had only considered the adjustment costs for domestic, rather than

foreign, refiners.

Actions Taken to Comply

• The Environmental Protection Agency revised its regulations on

conventional gasoline, which now permit but do not require foreign

refiners to apply for an individual baseline.

• The agency imposed enforcement requirements and established a

mechanism to ensure that the overall cleanliness of gasoline imports

does not deteriorate.
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Case 2: Korea's

Agricultural Shelf-Life

Standards

Parties

Plaintiff: United States

Defendant: Korea

Outcome

• Korea and the United States resolved the dispute prior to a WTO panel

proceeding. Korea agreed to modify its shelf-life regime.

Major Case Issues

• In May 1995, the United States filed a WTO complaint, stating that

Korea's shelf-life requirements, including the 30-day shelf-life

requirement for frozen, heat-treated meats was based on unscientific

principles and inconsistent with WTO rules. The United States further

claimed that the shelf-life of food products should be determined by the

manufacturers, as it is in most countries.

• In February 1994, Korea had reclassified imports of U.S. frozen,

heat-treated products, reducing the allowable shelf-life of these

products from 90 to 30 days. In effect, Korean shelf-life requirements set

such short time frames that many longer-lived food imports could not be

marketed in Korea. For example, the requirements essentially

eliminated imports of U.S. sausages, since the 30-day shelf-life was

about equal to the time it took for these products to clear port

inspections.

• Korea claimed its action was necessary to protect public health.

Case Resolution

• In July 1995, the United States and Korea informed the WTO that they

had reached a mutually acceptable agreement resolving the dispute.

Korea agreed to change its import regime to allow manufacturers of

various products to determine their shelf-life.

Actions Taken to Comply

• No action required.
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Case 3: U.S. Import

Duties on Automobiles

From Japan

Parties

Plaintiff: Japan

Defendant: United States

Outcome

• The United States and Japan resolved this dispute by negotiating a trade

agreement. As a result of the agreement, the United States withdrew its

threat of punitive import duties, and Japan did not pursue its WTO case.

Major Case Issues

• Japan requested consultations after the United States threatened to

impose unilateral punitive import duties on $5.9 billion in annual U.S.

imports of automobiles from Japan. The U.S. action followed an

affirmative determination under section 301 of the U.S. Trade Act of

1974.1 Japan maintained that the U.S. measures violated WTO

obligations regarding nondiscrimination among trading partners and

nonimposition of customs duties exceeding those in the U.S. Schedule

of Concessions. Japan also argued that the measures were inconsistent

with the Dispute Settlement Understanding, which prohibits unilateral

action to resolve disputes over trade under covered agreements.

• The United States countered that its action was warranted because it

was apparent after 20 months of talks that Japan would not take steps to

allow real market access in a sector accounting for nearly 25 percent of

the U.S. global trade deficit. Among other things, the United States

asserted that Japanese restrictions channeled most repair work to

Japanese government-certified garages that used few foreign parts,

limited the development of other garages more likely to carry foreign

parts, and constrained opportunities for U.S. automotive accessory

suppliers.

Case Resolution

• Prior to the formation of a dispute settlement panel, the United States

and Japan reached a bilateral agreement on measures to deregulate the

1

Section 301 addresses foreign unfair trade practices affecting U.S. exports of goods or

services, and intellectual property protection.
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replacement parts and accessories market in Japan. The agreement's

objectives were the significant expansion of sales opportunities and

purchases of foreign parts by Japanese firms and their U.S.-based

production facilities, the removal of problems that affect market access,

and the encouragement of imports of foreign autos and auto parts in

Japan.

• On the basis of the agreement, the United States terminated the section

301 investigation and began monitoring compliance with the agreement.

• Japan did not pursue establishment of a dispute settlement panel.

Actions Taken to Comply

• No action required.
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Case 4: Japan's Taxes

on Distilled Spirits

Parties

Plaintiff: United States

Defendant: Japan

Outcome

• Both the WTO panel and the Appellate Body ruled against Japan, which

subsequently equalized its taxes.

Major Case Issues

• The United States complained that Japan imposed different levels of

internal taxes on shochu (a type of alcohol) and other distilled spirits

and liquors under its Liquor Tax Law. The United States considered the

lower tax rate accorded to shochu to violate the WTO principle of

national treatment (that foreign goods should not be taxed less

favorably than domestic goods) for vodka, rum, gin, whisky, and brandy.

• Japan claimed that these alcohol products did not directly compete with

shochu and thus its Liquor Tax Law did not violate the principle of

national treatment.

Case Resolution

• The WTO panel and the Appellate Body ruled that Japan's Liquor Tax

Law violated the WTO national treatment principle because shochu and

vodka are like products, and other alcohols were directly competitive or

substitutable products. Therefore, both bodies recommended that Japan

should bring its Liquor Tax Law into conformity with its national

treatment obligations under the 1994 General Agreement on Tariffs and

Trade.

Actions Taken to Comply

• After the Appellate Body ruling, the United States requested arbitration

on Japan's compliance period. The United States sought 5 months (from

the adoption of the ruling); Japan countered with 23 months. The

arbitrator decided to give Japan 15 months to comply.

• Japan and the United States reached an agreement after the arbitration

that allowed Japan more time to implement the decision in exchange for

lower tariffs on various liquor products. Japan has begun lowering its
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tariffs and phasing in the changes to its tax law. It will complete these

actions in 2002.
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Case 5: European

Union Grain Tariffs

Parties

Plaintiff: United States

Defendant: European Union

Outcome

• The United States successfully used the WTO dispute settlement

consultation process as a vehicle to get the European Union (EU) to

improve market access for U.S. grain exports.

Major Case Issues

• In July 1995, the United States requested consultations in a matter

involving implementation of a U.S.-EU agreement providing for a

maximum duty (ceiling) to be paid on most imported grain. The United

States expected the EU to apply a consignment-by-consignment method

to determine the duty owed, but the EU believed that such an approach

was impractical. The bilateral agreement had been reached during the

Uruguay Round negotiations and incorporated into the EU's WTO tariff

schedule, but the parties disagreed about how the duties would be

assessed, delaying implementation.

Case Resolution

• The United States and the EU reached an understanding in December

1995 that provided for a maximum duty to be paid on most imported

grain based on a representative price system instead of the

consignment-by-consignment method. This approach entailed

assessment of duties based on the margin between a reference price

(derived from the average international market price for that particular

grain variety over a 2-week period) and the duty ceiling for that grain

variety.

• The EU also agreed to provide a special duty rebate for parboiled brown

rice, and a tariff-rate quota (TRQ) for malting barley.

Actions Taken to Comply

• After the December 1995 settlement, the United States renewed its

request for a panel based on the EU's failure to implement the

settlement terms. After additional negotiations, the EU implemented the
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settlement in 1997 by passing legislation creating the tariff-rate quota for

malting barley, the duty rebate for parboiled brown rice, and

subsequently the 8 percent reduction on the tariff for parboiled brown

rice.
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Case 6: European

Union Banana Import

Regime

Parties

Plaintiffs: United States and others2

Defendant: European Union

Outcome

• Both the WTO panel and the Appellate Body ruled against the EU.

Further, a compliance panel also ruled that the EU had failed to comply

with the rulings. The WTO authorized retaliation.

Major Case Issues

• The United States and four Latin American countries complained that

the 1993 EU regime for importing bananas was inconsistent with WTO

rules. The regime provided a duty-free quota to bananas from former

colonies of some EU members, while imports from Latin America were

subject to a restrictive TRQ. The system also shifted marketing of

bananas from U.S. and other non-EU firms to favor EU firms.

• The EU argued that the 1993 regime was required to integrate a complex

system of national regulations and establish a common market for

bananas, while meeting EU commitments to former colonies.

Case Resolution

• Both the WTO panel and the Appellate Body ruled that the EU's banana

regime violated WTO rules that resulted in (1) distribution of import

licenses to EU firms, taking away U.S. companies' business;

(2) imposition of burdensome licensing requirements for banana

imports from Latin America; and (3) discriminatory allocation of access

to the EU market, restricting Latin American bananas while not similarly

limiting bananas from former colonies.

• In response, the EU enacted a revised banana regime in 1999. The

original five countries plus Panama then argued that the revised EU

banana regime was virtually the same as the 1993 WTO-inconsistent

regime.

2

Co-complainants were Guatemala, Honduras, Mexico, and Ecuador.
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• The WTO arbitrators agreed with the complainants and rejected the

EU's position that the revised regime fulfilled its obligation in

conformity with the WTO panel ruling.

Actions Taken to Comply

• The WTO authorized the United States to suspend concessions covering

trade in an amount of $191.4 million, equal to the harm done to U.S.

economic interests.
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Case 7: U.S. Underwear

Import Restraint

Parties

Plaintiff: Costa Rica

Defendant: United States

Outcome

• Both the WTO panel and the Appellate Body ruled against the United

States, and the United States allowed the import restraint to expire.

Major Case Issues

• After failed consultations with Costa Rica under the WTO Agreement on

Textiles and Clothing (ATC), the United States imposed a quantitative

restraint on imports of cotton and manmade fiber underwear from

Costa Rica, claiming serious damage, or actual threat thereof, under the

ATC.

• Subsequently, although the ATC's Textile Monitoring Body3 did not find

serious damage, it failed to reach consensus on whether there was an

actual threat of serious damage. Costa Rica requested a dispute

settlement panel, claiming that the U.S. quantitative restriction was

inconsistent with the ATC and should be withdrawn. Costa Rica also

claimed that the United States had acted inconsistently with the ATC by

backdating the quantitative restraint.

Case Resolution

• The panel ruled that the United States had violated the ATC by imposing

a restriction on Costa Rican imports without having demonstrated that

they had caused or threatened serious damage to U.S. industry. The

panel also ruled that the United States had violated the ATC by setting

the restraint period starting on the date of the request for

consultations—March 22, 1995—rather than on the date of the

publication in the Federal Register of that information—April 21, 1995.

• Costa Rica appealed the portion of the panel finding that allowed the

United States to backdate its restraint to the date of publication. The

United States argued that authority to backdate a restraint was essential

3

Among other things, the Textile Monitoring Body was established to supervise

implementation of the ATC.
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to allow an importing member to protect itself from speculative import

surges.

• The Appellate Body overruled the WTO panel and found that giving

retroactive effect to a safeguard restraint is not permitted by the ATC.

The Appellate Body did point out, however, that when a flood of imports

becomes a real and serious problem, members can act under a provision

of the ATC that authorizes immediate application of a restraint in highly

unusual and critical circumstances.

Actions Taken to Comply

• The United States allowed the import restraint to expire.
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Case 8: European

Union Ban on Meat

From

Hormone-Treated

Animals

Parties

Plaintiff: United States

Defendant: European Union

Outcome

• Both the WTO panel and the Appellate Body found the EU in violation of

WTO obligations. The United States was authorized to suspend

concessions to the EU when the EU was found not to have complied

with the rulings.

Major Case Issues

• The United States claimed that a ban on the importation and sale of

animals and meat derived from animals that had been treated with any

of six specific growth hormones, was inconsistent with several aspects

of the WTO Agreement on the Application of Sanitary and Phytosanitary

(human, animal, and plant health) Measures. The United States argued

in part that the measures were not based on an assessment of risk, were

more trade restrictive than required to protect human life or health,

were not based on scientific principles, and were maintained without

sufficient scientific evidence.

• The EU argued that its measures satisfied all conditions imposed by the

WTO Agreement on the Application of Sanitary and Phytosanitary

Measures.

Case Resolution

• The panel and Appellate Body both found that the EU measures were

inconsistent with the agreement.

• However, the Appellate Body overruled the panel on certain substantive

and procedural issues. For example, the Appellate Body overturned the

panel by concluding that a member need not demonstrate that it actually

took into account a risk assessment when it enacted or maintained the

measure. The Appellate Body also modified the Panel's interpretation by

finding that a member must be able to both cite a risk assessment

relating to the sanitary/phytosanitary measure it had adopted and to

demonstrate that the results of the risk assessment sufficiently warrant

or reasonably support the sanitary/phytosanitary measure at stake. It
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went on to state that the agreement does not require the risk assessment

to embody only the view of a majority of the scientific community.

• Neither the WTO panel nor the Appellate Body made a direct finding on

the U.S. argument regarding whether the EU measures were based on

scientific principles and maintained without sufficient scientific

evidence. Rather, they found the measure was not based on a risk

assessment.

Actions Taken to Comply

• The United States and the EU disagreed about what steps the EU could

take to comply with the ruling. Ultimately, the WTO authorized

suspension of U.S. trade concessions to the EU in the amount of

$116.8 million per year.
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Case 9: Japan Sound

Recordings

Parties

Plaintiff: United States

Defendant: Japan

Outcome

• Japan and the United States reached a mutually satisfactory agreement

prior to a panel decision whereby Japan amended its copyright

protection to grant 50 years' protection for sound recordings.

Major Case Issues

• The United States argued that Japan's copyright law did not adequately

protect sound recordings as required by the Agreement on

Trade-Related Aspects of Intellectual Property Rights. The United States

argued that the agreement requires countries to protect sound

recordings for 50 years from the date of the copyright or when the

performance took place and that this protection should be applied

retroactively to pre-existing recordings. At the time the case was

brought, this would have protected recordings going back to 1946.

Japan's copyright law only protected recordings produced after

January 1, 1971, when Japan first implemented a law enforcing

copyright protection.

• Japan argued that the agreement allows WTO members to determine

their own level of retroactive protection and that since Japan did not

provide retroactive protection beyond 1971 for its own copyright

holders, it did not have to do so for foreign copyright holders.

Case Resolution

• The United States and Japan reached a negotiated agreement and

terminated consultations. In the agreement, Japan indicated that it had

amended Japanese copyright law to extend protection for sound

recordings for at least 50 years.

• Japan also agreed to extend that protection to existing recordings that

had not already enjoyed a 50-year term of protection in the country of

origin or in the country in which protection was sought.
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Actions Taken to Comply

• Japan passed legislation changing domestic copyright laws to protect

existing sound recordings going back 50 years instead of only providing

protection to existing recordings produced after January 1, 1971.
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Case 10: Canada's

Measures on

Magazines

Parties

Plaintiff: United States

Defendant: Canada

Outcome

• Both the WTO panel and the Appellate Body ruled against Canada.

Major Case Issues

• The United States complained that Canada maintained several measures

that prohibited import of certain periodicals to Canada, imposed an

80-percent excise tax on certain “split-run”4 periodicals, and applied

favorable postal rates to certain Canadian periodicals. The United States

argued that these measures were in conflict with WTO prohibitions

against quantitative restrictions on imports and with Canada's national

treatment obligations.

• Canada argued that its import prohibition on magazines was a justifiable

exception to the GATT's prohibition on quantitative restrictions, that its

excise tax affecting trade in services was not subject to GATT

nondiscrimination requirements, and that its postal subsidy rates were

either not covered by GATT or were allowable.

Case Resolution

• The WTO panel found that Canada's import ban was not justified as an

exception under other WTO provisions and violated WTO provisions on

quantitative restrictions. It also found that Canada's excise tax violated

national treatment because it resulted in different rates of internal tax

that disadvantaged imports. However, it found Canada's postal subsidy

to be exempt from national treatment requirements under a provision in

GATT 1994.

• The Appellate Body upheld the panel's findings on the excise tax but

reversed the panel's ruling on the postal subsidy, finding it to violate

national treatment rules.

4

Split-run periodicals are periodicals sold both in Canada and abroad in which Canadian

editions contain advertisements for a Canadian audience.
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Actions Taken to Comply

• Canada complied with the WTO panel ruling by repealing its import ban

on split-runs, discontinuing the excise tax, eliminating discriminatory

postal rates, and modifying postal subsidies. However, Canada

introduced legislation shortly before taking these measures that would

have prohibited U.S. and other non-Canadian publishing companies

from advertising directly to Canadian readers in magazines they

produce. Under a U.S. threat of sanctions under the North American

Free Trade Agreement (NAFTA), the two countries entered into a

bilateral agreement requiring concessions by Canada in exchange for a

U.S. agreement not to challenge the Canadian measures under WTO,

NAFTA, or section 301 of the 1974 Trade Act. The proposed legislation

was modified before being enacted.
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Case 11: U.S. Wool

Coat Import Restraint

Parties

Plaintiff: India

Defendant: United States

Outcome

• The case was resolved when the United States agreed to remove the

import restraint and India agreed to withdraw its request for a WTO

panel.

Major Case Issues

• Pursuant to the WTO Agreement on Textiles and Clothing, the United

States requested consultations with India on its exports of women's and

girls' wool coats, claiming serious damage to U.S. industry or actual

threat thereof. India disagreed, and on July 14, 1995, the United States

imposed an import restraint on these imports from India, effective

retrospectively from April 18, 1995.

• The Textile Monitoring Body reviewed the case and found that serious

damage had not been demonstrated but could not reach consensus on

the actual threat of serious damage. In a second report, the body could

not decide whether the restraint could continue because of the absence

of consensus on the existence of an actual threat of serious damage.

• India requested a WTO panel, complaining that the restraint was

inconsistent with the WTO Agreement on Textiles and Clothing.

Case Resolution

• The United States agreed to remove its import restraint and India then

terminated further dispute settlement action.

Actions Taken to Comply

• No action required.
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Case 12: U.S. Wool

Shirt Import Restraint

Parties

Plaintiff: India

Defendant: United States

Outcome

• Both the WTO panel and the Appellate Body ruled that the U.S. import

restraint was improper but agreed that India had the burden of proof in

the case. The United States had already withdrawn the restraint prior to

the rulings.

Major Case Issues

• India complained that an import restraint the United States had placed

on imports of woven wool shirts and blouses from India was

inconsistent with the ATC. India argued that the burden of

demonstrating serious damage or the actual threat thereof was on the

United States, the importing member that had imposed the restraint.

• During consultations and the panel process, the United States asserted

that imports of Indian woven wool shirts and blouses were causing

serious damage or the actual threat thereof to U.S. industry. The Textile

Monitoring Body had reviewed the case and found that the actual threat

of serious damage had been demonstrated, and that this threat could be

attributed to imports from India.

Case Resolution

• The panel concluded that the U.S. import restraint violated provisions of

the ATC because the United States had not shown serious damage or the

actual threat thereof to U.S. industry from the import of India woven

wool shirts and blouses. The panel also found that the burden was on

India, the party initiating the panel proceedings, to establish that the

U.S. restraint was inconsistent with the ATC.

• India appealed the burden of proof issue, and the Appellate Body

affirmed the panel finding, concluding that India had the burden to

establish a presumption that the U.S. restraint determination was

inconsistent with the ATC. The United States then had the burden of

rebutting this presumption.
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Actions Taken to Comply

• The United States withdrew the import restraint prior to the panel and

Appellate Body ruling due to a steady decline in imports of the Indian

products in question.
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Case 13: Hungary's

Agricultural Export

Subsidies

Parties

Plaintiffs: United States and others5

Defendant: Hungary

Outcome

• Hungary agreed to change its agricultural export subsidy practices. The

WTO granted Hungary a temporary waiver so that it could come into

compliance.

Major Case Issues

• The complaining parties argued that the level of export subsidies

provided by the government of Hungary for certain agricultural

commodities exceeded its commitment under GATT 1994.

• Hungary maintained that a mistake was made in compiling the data used

to calculate its commitment to reduce subsidies. Hungarian authorities

argued that if subsidy reductions were undertaken at the levels required,

the country's agricultural sector would be seriously damaged.

Case Resolution

• In July 1997, an agreement was reached between Hungary and the

complaining countries. Hungary agreed to comply with its original

export subsidy schedule in exchange for a temporary waiver that gives it

a longer transition period to reduce its export subsidies for certain

agricultural commodities.

• The agreement requires Hungary to cut its export subsidy levels by more

than 65 percent. Hungary will replace these subsidies with domestic

support measures, consistent with its WTO obligations.

Actions Taken to Comply

• In December 1997, the Hungarian government published a new export

subsidy regime. Hungary has also undertaken a shift from exporter

subsidies to domestic support.

5

Co-complainants were Argentina, Australia, Canada, Japan, New Zealand, and Thailand.
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Case 14: Pakistan

Patent Mailbox

Provision

Parties

Plaintiff: United States

Defendant: Pakistan

Outcome

• The United States and Pakistan reached an agreement prior to a panel

decision whereby Pakistan agreed to come into compliance with WTO

intellectual property provisions.

Major Case Issues

• The United States complained that Pakistan had neither made patent

protection available for pharmaceutical and agricultural chemical

inventions nor established a system, called a “mailbox,”6 for filing patent

applications for these inventions, as required by the Agreement on

Trade-Related Aspects of Intellectual Property (TRIPS). The United

States also argued that Pakistan had failed to establish a system to

provide patent applicants with exclusive marketing rights for their

products as required by the agreement.

• Pakistan responded that its parliament was considering amending its

patent law to include mailbox provisions.

Case Resolution

• The United States and Pakistan negotiated a mutually agreed solution to

the dispute, in which Pakistan stated that it had taken action to come

into compliance with TRIPS.

Actions Taken to Comply

• Pakistan's President issued an ordinance to provide a system for

submitting patent applications and for granting exclusive marketing

rights to the patent applicant, in accordance with TRIPS.

6

The mailbox system preserves the novelty and priority of inventions while the applicant

waits for a patent.
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Case 15: Portugal

Patent Protection

Parties

Plaintiff: United States

Defendant: Portugal

Outcome

• Portugal amended its patent law to comply with WTO obligations.

Major Case Issues

• The United States complained that the term limit that Portugal granted

existing patents under Portuguese law was inconsistent with Portugal's

obligations under the WTO TRIPS agreement. TRIPS requires members

to grant patent protection for at least 20 years from the date the

application is filed. TRIPS also requires developed country members to

grant this term to all patents in force as of January 1, 1996, from the date

of the application. Portugal had previously amended its patent law to

comply with this TRIPS requirement, but the law only applied to future

patents.

Case Resolution

• The United States and Portugal negotiated a mutually agreed solution to

their dispute. The agreement stated that Portugal had changed its patent

law to confirm that all patents that were already in force on January 1,

1996, and all patents granted after that date that were pending on

January 1, 1996, would receive protection for either 15 years from the

date of the patent or 20 years from the effective filing date, whichever is

longer.

Actions Taken to Comply

• Portugal passed legislation changing its patent law.
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Case 16: U.S.

Helms-Burton Act

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• Resolved through a political understanding between United States and

the EU.

Major Case Issues

• After passage of the Cuban Liberty and Democratic Solidarity (Libertad)

Act of 1996 (Helms-Burton Act),7 the EU requested a panel and

complained about several aspects of U.S. trade sanctions against Cuba.

With regard to Helms-Burton, the EU complained about titles III and IV,

which respectively (1) created a private right of action for U.S. persons

or entities against others who have trafficked in property confiscated by

the Cuban government and (2) required the Secretary of State to deny

U.S. visas and exclude from the United States individuals or officials of

firms that had confiscated or trafficked in property owned by a U.S.

national.

• The United States argued that the EU assertions involved a foreign

policy rather than a trade issue and that the WTO was not the

appropriate forum for resolution.

Case Resolution

• Prior to a panel decision, in 1997 the United States and the EU

announced a bilateral, political understanding. The EU agreed to

(1) suspend the WTO proceedings, (2) continue its efforts to promote

democracy in Cuba, and (3) step up efforts to develop disciplines and

principles for strengthening investment protection both bilaterally with

the United States and multilaterally. In exchange, the United States

pledged to seek authority from Congress to allow the President to waive

title IV of Helms-Burton. As part of this understanding, the United States

also agreed to work with the EU toward meeting the terms for waivers

7

Public Law 104-114, codified at 22 U.S.C. §§ 6021 and following.
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under the 1996 Iran and Libya Sanctions Act,8 though with no

commitment to grant such waivers. The understanding also provided

that the EU reserved the right to resume panel proceedings if action is

taken against EU companies or individuals under titles III or IV of

Helms-Burton or if waivers under the Iran and Libya Sanctions Act were

not granted.

• In a subsequent 1998 understanding, the United States and the EU

agreed that certain described disciplines and principles for

strengthening investment protection would apply when the U.S.

administration obtains an amendment to waive title IV of Helms-Burton.

Actions Taken to Comply

• Legislation authorizing the waiver has not yet been enacted.

8

The act, Public Law 104-172, calls for sanctions against persons or entities, including

foreign persons or entities, that carry on certain kinds of trade with Iran or Libya.
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Case 17: Tariff

Retaliation on

European Union

Products

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• The EU withdrew its panel request after the United States dropped the

retaliatory duties in question.

Major Case Issues

• The EU requested a WTO panel to examine U.S. tariff increases on

imports from the EU. The duties had been imposed by the United States

in 1989 as part of a section 301 determination in retaliation for EU

legislation that resulted in a ban on imports of hormone-treated beef

after the EU blocked U.S. efforts to submit the matter to dispute

settlement under the Tokyo Round Agreement on Technical Barriers to

Trade.

• The EU stated that maintenance of the retaliatory duties was

inconsistent with U.S. obligations under GATT and the WTO dispute

settlement understanding.

Case Resolution

• The United States requested its own WTO dispute settlement panel to

examine the consistency of the EU's hormone ban with WTO

obligations. The United States withdrew the retaliatory duties after this

panel was established.

• The EU then withdrew its complaint.

Actions Taken to Comply

• No action required.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 60 GAO/NSIAD-00-210 International Trade

Case 18: Turkey's

Taxation of Foreign

Films

Parties

Plaintiff: United States

Defendant: Turkey

Outcome

• The case was settled before reaching a WTO panel.

Major Case Issues

• The United States complained that Turkey imposed a 25-percent

municipality tax on box office receipts generated from the showing of

foreign-origin films but did not apply the tax to domestic films. The

United States considered this tax a violation of the WTO principle of

national treatment (that foreign goods should not be taxed less

favorably than domestic goods).

Case Resolution

• The case was settled before WTO panel deliberations began. Turkey

agreed to equalize taxes imposed on box office receipts from the

showing of domestic and imported films. As a result, the United States

and Turkey agreed to formally terminate consultations, and the United

States withdrew the matter from WTO consideration.

Actions Taken to Comply

• Turkey equalized the applicable taxes in December 1997.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 61 GAO/NSIAD-00-210 International Trade

Case 19: Japan's

Import Measures

Affecting Film

Parties

Plaintiff: United States

Defendant: Japan

Outcome

• The WTO panel ruled against the United States, which did not appeal the

decision.

Major Case Issues

• The United States complained that the government of Japan had

implemented measures affecting the distribution and sale of consumer

photographic film and paper that denied the United States the benefits

of tariff concessions Japan had made, afforded protection to domestic

production, and accorded less favorable treatment to imported film and

paper than to comparable products of national origin. In addition, the

United States claimed the measures lacked transparency (openness)

and were not administered in a uniform, impartial manner.

• The United States further asserted that the measures (1) closed

traditional distribution channels to foreign manufacturers, (2) restricted

alternative channels of distribution, and (3) restricted the ability of

foreign firms to use sales promotions to break into the market or

expand their market presence.

• Japan denied all the U.S. claims, stating that its market for film was open

and that there were no government distribution or promotion measures

that afforded protection to domestic industry or disadvantaged foreign

suppliers.
Appendix I

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Page 62 GAO/NSIAD-00-210 International Trade

Case Resolution

• The panel concluded that the United States had not provided sufficient

evidence to support its claims against the government of Japan.

Specifically, the panel found that the United States did not prove that

(1) the Japanese measures individually or collectively nullified or

impaired tariff benefits accruing to the United States, (2) the Japanese

measures accorded less favorable treatment to imported photographic

film and paper than to domestic film and paper, and (3) Japan failed to

publish administrative rulings of general application and thereby

violated WTO requirements for transparency and impartial

administration.9

Actions Taken to Comply

• No action required.

9

After the panel ruling, USTR and the U.S. Department of Commerce announced an initiative

to (1) review implementation of formal representations made by Japan before the WTO

dispute settlement panel regarding the openness of its market to foreign film and its lack of

tolerance of restrictive business practices, (2) collect and assess data on penetration by

foreign film in Japan's distribution channels and retail stores, and (3) issue a report on a

semi-annual basis.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 63 GAO/NSIAD-00-210 International Trade

Case 20: U.S.

Antidumping

Investigation on

Mexican Tomatoes

Parties

Plaintiff: Mexico

Defendant: United States

Outcome

• The case was resolved outside of WTO dispute settlement due to an

agreement between Mexican tomato growers and the Department of

Commerce. A WTO dispute settlement panel was not established.

Major Case Issues

• Mexico requested consultations regarding the U.S. initiation of an

antidumping investigation on fresh and refrigerated Mexican tomatoes.

Commerce issued a preliminary determination that would have imposed

antidumping duties of 17.56 percent on most Mexican tomatoes.

Case Resolution

• After the preliminary antidumping determination was announced,

Commerce and the Mexican tomato growers signed a suspension

agreement. The agreement, which eliminates injury through the

establishment of a predetermined floor price for imported Mexican

tomatoes, means the preliminary antidumping order will not take effect

and no future antidumping duties will be assessed as long as the floor

price is met. Following the agreement, Mexico did not pursue its WTO

matter further.

Actions Taken to Comply

• No action required.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 64 GAO/NSIAD-00-210 International Trade

Case 21: India Patent

Mailbox Provision

Parties

Plaintiff: United States

Defendant: India

Outcome

• Both the WTO panel and the Appellate Body ruled against India. India

amended its Patent Act to come into compliance with the WTO rulings.

Major Case Issues

• The United States complained that India neither provided patent

protection for pharmaceutical and agricultural chemical products nor

established a formal system, called a “mailbox,” for filing patent

applications for these products, as required by TRIPS. The United States

also argued that India had failed to establish a system to provide patent

applicants with exclusive marketing rights for their products.

• India argued that the TRIPS Agreement allowed members to determine

the appropriate method of implementing the agreement and that since

India had effectively implemented the mailbox requirement through

“administrative action,” legislation was not needed. India also argued

that the transitional arrangements in TRIPS allowed it to postpone

legislation establishing a system to provide patent applicants with

exclusive marketing rights for their products.

Case Resolution

• The Appellate Body agreed with the panel ruling that India had not

complied with its obligations under TRIPS to establish a means for the

filing of mailbox applications for patents. The Appellate Body rejected

India's claim that it fulfilled its obligation through administrative action

and also agreed with the panel that India should have had a mechanism

in place to provide for the grant of exclusive marketing rights for those

inventions, effective from the date of entry into force of the WTO

Agreement.

Actions Taken to Comply

• India approved amendments to its Patent Act to conform with TRIPS.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 65 GAO/NSIAD-00-210 International Trade

Case 22: Brazil's

Automobile Regime

Parties

Plaintiff: United States

Defendant: Brazil

Outcome

• Resolved through negotiation without proceeding to a WTO panel.

Brazil agreed to eliminate trade- and investment-distorting measures in

its auto regime.

Major Case Issues

• The United States objected to various Brazilian measures that

(1) provided for tariff benefits to certain companies located in Japan,

South Korea, and the EU; (2) provided benefits to companies that

invested in automotive manufacturing in northeastern Brazil; and

(3) reduced duties for motor vehicles and parts manufacturers based on

compliance with an average domestic content requirement, and trade

balancing and local content requirements with regard to inputs. The

United States considered these measures to violate several WTO

obligations.

Case Resolution

• The case was settled by agreement between the United States and

Brazil. Brazil agreed to eliminate the trade- and investment-distorting

measures in its auto regime by December 31, 1999, and not to extend its

program to its Mercosur10 partners when their auto regimes are unified.

In addition, Brazil agreed that no applications would be accepted after

certain dates for the program, which may have limited the number of

companies taking advantage of the special benefits before they were

phased out.

• Several days after the agreement, the United States announced that it

would terminate its section 301 investigation on this matter.

10Mercosur, the Common Market of the South, was created in 1991 by Argentina, Brazil,

Paraguay, and Uruguay.
Appendix I

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Actions Taken to Comply

• Brazil eliminated the trade- and investment-distorting measures under

this auto regime. The United States is monitoring the development of the

auto policies of Mercosur countries, including Brazil.
Appendix I

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Dispute Settlement Cases

Page 67 GAO/NSIAD-00-210 International Trade

Case 23: Argentina

Duties on Textiles,

Apparel, and Footwear

Parties

Plaintiff: United States

Defendant: Argentina

Outcome

• Both the WTO panel and the Appellate Body ruled against Argentina,

which then modified its methods for assessing duties and its statistical

tax.11

Major Case Issues

• The United States complained that Argentine measures imposing

specific duties (imposed per unit) on various textiles, apparel, and

footwear in excess of a bound rate of 35 percent ad valorem (percent ad

valorem is the percent value of the subject merchandise), were

inconsistent with various WTO obligations.

• The United States also complained that Argentina's imposition of a

statistical tax of 3 percent ad valorem on these imports from all sources

other than Mercosur countries was WTO inconsistent.

• Argentina contended that to the extent the specific duties did not

exceed the “ad valorem equivalent” of Argentina's bound rate of

35 percent, they were WTO consistent, as was the statistical tax.

Case Resolution

• The panel ruled that the specific import duties Argentina imposed on

textiles and apparel were inconsistent with the requirements of GATT

1994.12 The panel also ruled that the statistical tax of 3 percent ad

valorem imposed by Argentina on imports was inconsistent to the

extent that it resulted in charges levied in excess of the costs of services

rendered to the specific exporters involved. GATT 1994 requires that

these taxes be limited to the approximate cost of services rendered.

11Argentina's statistical tax was intended to cover the cost of providing general export and

import statistical services.

12The WTO panel did not rule on specific footwear duties because Argentina had revoked

the duties and replaced them with safeguard duties.
Appendix I

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Dispute Settlement Cases

Page 68 GAO/NSIAD-00-210 International Trade

• The Appellate Body upheld the panel ruling but found that specific

duties could be imposed where there is a bound ad valorem rate so long

as the specific duties do not exceed that rate.

Actions Taken to Comply

• Argentina complied with the ruling when it took measures to ensure that

its specific duties on textiles and apparel did not exceed the equivalent

of 35 percent ad valorem and when it stopped charging an ad valorem

statistical tax without upper limits and modified the tax to approximate

the cost of rendering services to importers.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 69 GAO/NSIAD-00-210 International Trade

Case 24: Australia

Automotive Leather

Export Subsidies

Parties

Plaintiff: United States

Defendant: Australia

Outcome

• A WTO panel ruled that Australia improperly provided an export

subsidy and recommended that the subsidy be withdrawn.

Major Case Issues

• The United States brought a case against Australia for improperly

providing export subsidies to an Australian automotive leather

manufacturer. After initial consultations, Australia agreed to remove the

export subsidy but subsequently provided a new package of subsidies—

including a loan and a grant package on preferential and

non-commercial terms—specifically for this leather manufacturer. The

United States then brought a second dispute settlement case against this

new measure.

• Australia argued that the loan and grant contracts were not covered by

the WTO Subsidies agreement.

Case Resolution

• The panel ruled that the Australian loan was not an export subsidy

under the Subsidies agreement but that the grant was an export subsidy.

The panel further recommended that the measure be withdrawn within

90 days.

• Australia agreed to comply, but the United States did not deem its

response to be adequate and requested a compliance review. The panel

then ruled that Australia had failed to withdraw the prohibited subsidy

within the specified 90 day period.

Actions Taken to Comply

• After the compliance review panel ruling, Australia and the United

States mutually agreed to resolve the compliance issue through

negotiations. The negotiations concluded with the Australian company

agreeing to partially repay the subsidy and Australia agreeing to exclude

the industry from current and future subsidy programs.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 70 GAO/NSIAD-00-210 International Trade

Case 25: U.S. Ban on

Shrimp Imports to

Protect Turtles

Parties

Plaintiffs: India, Malaysia, Pakistan, Thailand

Defendant: United States

Outcome

• Both the WTO panel and the Appellate Body ruled against the United

States. The United States took several steps, including changing its

procedural guidelines to comply with the ruling.

Major Case Issues

• The complainants contested the partial U.S. embargo on the importation

of certain shrimp and shrimp products from countries that had not been

certified by the Department of State as having a comprehensive sea

turtle conservation regime. Notably, they argued that the embargo was

not a conservation measure as envisioned under GATT 1994 article XX

and that the United States did not have a right to take unilateral

measures to protect a resource not in its territory.

• The United States argued that the measure was a justifiable restriction

on importation of shrimp under article XX, which, the United States

said, contains no express or implied jurisdictional limitations. It further

said that the embargo was a permitted conservation measure designed

to protect an endangered species (sea turtles), considered to be a shared

global resource.

Case Resolution

• The WTO panel found, in part, that the U.S. measure was not justified

under article XX because the measure met the panel's test of being a

“risk to the multilateral trading system.” The United States appealed the

ruling and the test, arguing the panel was impermissibly elevating

commercial considerations above those enunciated in article XX.

• The Appellate Body rejected the panel's test and found that the U.S.

measure fell within the scope of article XX because it was related to the

conservation of an exhaustible natural resource, and a sufficient

connection existed between the resource and U.S. interests protected

under article XX. However, the Appellate Body also found the U.S.

measure did not qualify for an exception because it had been applied in

an arbitrary and discriminatory manner.
Appendix I

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Dispute Settlement Cases

Page 71 GAO/NSIAD-00-210 International Trade

Actions Taken to Comply

• While restrictions on imports of shrimp from noncertified countries

remain in effect, the Department of State revised its guidelines to

establish greater transparency and due process in country certification

decisions. It also increased U.S. efforts to negotiate international

agreements on sea turtle protection, and offered enhanced technical

assistance.
Appendix I

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Dispute Settlement Cases

Page 72 GAO/NSIAD-00-210 International Trade

Case 26: Indonesia

Automobile and Auto

Parts Measures

Parties

Plaintiffs: United States, Japan, European Union

Defendant: Indonesia

Outcome

• A WTO panel ruled against Indonesia, and Indonesia eliminated its

WTO-inconsistent measures.

Major Case Issues

• The United States complained that Indonesia maintained certain

benefits for manufacturers of autos and auto parts in the form of

reduced duties on imports and a reduction or elimination of taxes on the

sale of motor vehicles. These benefits were conditioned on compliance

with domestic and local content requirements and, in some cases, the

use of an Indonesian trademark.

• The United States considered these benefits to violate WTO provisions

on subsidies, most-favored-nation treatment (that imported goods from

different countries should receive equal treatment), national treatment

(that imported products should be treated no less favorably than

domestic goods), investment measures that distort trade, and

intellectual property protection.

Case Resolution

• The panel ruled that various aspects of Indonesia's auto policies

violated WTO provisions on national treatment, most-favored-nation

treatment, and investment provisions that distort trade. It also

concluded that the subsidies provided under the auto program caused

serious prejudice to the European Union and should be withdrawn or

modified.

Actions Taken to Comply

• Indonesia eliminated its measures.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 73 GAO/NSIAD-00-210 International Trade

Case 27: European

Union Customs

Classification of

Computer Equipment

Parties

Plaintiff: United States

Defendant: European Union

Outcome

• The panel ruling supported the EU on one issue and the United States on

another. The Appellate Body reversed the panel ruling that was

favorable to the United States.

Major Case Issues

• The United States complained that EU customs authorities had

reclassified computer local area network adapter cards and personal

computers with multimedia capability into tariff categories with

substantially higher tariffs. The United States argued that it was entitled

to “legitimate expectations” that the EU would not raise the tariff for

network equipment and personal computers above the level specified in

the EU tariff schedule and that increases were inconsistent with WTO

obligations.

• The EU argued that it had never committed itself nor indicated that it

would classify the specified computer equipment in the category

expected by the United States. The EU also argued that the United

States did not have a legitimate basis to reasonably expect that these

products would be provided treatment foreseen under relevant tariff

headings of the tariff schedules, because during Uruguay Round

negotiations there was no uniform treatment within EU member states

for these products.

Case Resolution

• The panel found that the EU had not acted inconsistently with WTO

obligations regarding the tariff treatment of multimedia personal

computers. However, the panel also found that the EU's failure to

accord imports of local area network equipment from the United States

treatment no less favorable than that provided in its tariff schedules was

inconsistent with WTO obligations.
Appendix I

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Dispute Settlement Cases

Page 74 GAO/NSIAD-00-210 International Trade

• The Appellate Body reversed the panel's ruling with regard to local area

network equipment and did not find that the EU had provided the

United States with less favorable treatment than required by its tariff

schedules for this equipment.

• The Appellate Body reversed the panel's finding that the United States

was entitled to “legitimate expectations” that local area network

equipment would be accorded the tariff treatment provided to

automatic data processing equipment.

Actions Taken to Comply

• No action required, but as part of its commitments under the

Information Technology Agreement the EU eliminated tariffs on all local

area network equipment.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 75 GAO/NSIAD-00-210 International Trade

Case 28: U.S.

Antidumping Order on

Urea

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• The case was resolved by action taken by the Department of Commerce

prior to the establishment of a WTO panel.

Major Case Issues

• The EU complained that the Department of Commerce had not

completed its changed circumstances review of an antidumping order

on imports of urea from the former German Democratic Republic. Urea

is a chemical compound used as fertilizer. The EU argued that

Commerce should revoke the order because the German Democratic

Republic no longer existed.

• In its preliminary changed circumstances determination, Commerce

decided that the original order should be applied only to urea imports

from the former states of the German Democratic Republic. Commerce,

however, had not yet issued its final determination.

Case Resolution

• U.S. laws permit Commerce to revoke an antidumping order if domestic

industry no longer has an interest in maintaining the order. In this case,

U.S. industry filed a “letter of no further interest” in the urea

antidumping order, and Commerce then revoked the order.

Actions Taken to Comply

• No action necessary.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 76 GAO/NSIAD-00-210 International Trade

Case 29: Philippines

Pork and Poultry

Tariff-Rate Quotas

Parties

Plaintiff: United States

Defendant: Philippines

Outcome

• The United States and the Philippines negotiated a resolution to the

dispute prior to a WTO panel decision.

Major Case Issues

• In its request for consultations, the United States complained that

Philippine regulations on administration of its tariff-rate quotas13

discouraged imports by allocating 85 percent of pork and 99 percent of

poultry import licenses to Philippine producers of those commodities,

even though Philippine producers failed to utilize their import permits.

The United States asserted that the administration of the quotas violated

a number of WTO provisions.

Case Resolution

• The Philippines and the United States negotiated an understanding

resolving the dispute. In February 1998, the Philippines implemented the

understanding by modifying an administrative order dealing with the

tariff-rate quota system for pork and poultry. The new system

discourages firms from holding import licenses if they fail to make use

of them.

Actions Taken to Comply

• No action required.

13The Philippine regulations had been issued in response to a U.S. threat to request

negotiations under GATT 1994 regarding Philippine failure to implement tariff rate-quotas

for pork and poultry by July 1995, as called for under its Uruguay Round commitments.
Appendix I

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Dispute Settlement Cases

Page 77 GAO/NSIAD-00-210 International Trade

Case 30: Japan's

Measures Affecting

Fruit Imports

Parties

Plaintiff: United States

Defendant: Japan

Outcome

• Both the WTO panel and the Appellate Body ruled against Japan. Japan

eliminated the import measures in question.

Major Case Issues

• The United States complained that Japan's varietal testing requirement

was inconsistent with the WTO sanitary/phytosanitary agreement, in

part because the measure was not based on scientific principles or a risk

assessment, was not transparent, and was more trade restrictive than

necessary.

• Japanese law prohibits the importation of certain agricultural products14

because of their potential to host coddling moth, which is not found in

Japan. The prohibition can be lifted, however, if an exporting country

can demonstrate that an alternative quarantine method achieved the

same level of protection as the ban.

• Japan developed guidelines as model test procedures to confirm the

efficacy of alternative methods. The guidelines outlined the testing

requirements for the initial lifting of the import ban on a product and the

testing requirements for approval of additional varieties of the product.

• Japan claimed that its policy was fully consistent with the

sanitary/phytosanitary agreement and was entirely based on plant

health considerations.

Case Resolution

• The WTO panel found Japan's varietal testing requirement to be

inconsistent with the WTO sanitary/phytosanitary agreement in a

number of respects and recommended that the WTO request that Japan

bring its measures into conformity with its obligations under that

agreement.

14The products were apples, cherries, peaches and nectarines, walnuts, apricots, pears,

plums, and quince.
Appendix I

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Dispute Settlement Cases

Page 78 GAO/NSIAD-00-210 International Trade

• The Appellate Body review generally upheld the panel's finding that

Japan's varietal testing requirement was inconsistent with its WTO

obligations.

Actions Taken to Comply

• Japan eliminated its varietal testing requirement.

• The United States and Japan continue to negotiate about the provisions

of the quarantine measure that will replace the former requirement.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 79 GAO/NSIAD-00-210 International Trade

Case 31: U.S. Textile

and Apparel Rules of

Origin

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• The United States and the EU negotiated a solution to the dispute. The

United States passed legislation to clarify its rules of origin.

Major Case Issues

• The EU complained that U.S. changes to its rules of origin for textiles

and apparel products, in particular those in section 334 of the Uruguay

Round Agreements Act,15 adversely affected exports of EU fabrics,

scarves, and other flat textile products to the United States. These

products were no longer recognized in the United States as being of

European origin and thus lost the quota-free access to the U.S. market

that they had previously enjoyed.

Case Resolution

• The EU and the United States reached a mutually agreed solution to the

dispute. Specifically, the United States agreed that it would propose

legislation that would restore its prior rules of origin for silk

accessories, dyed and printed cotton fabrics, and related products.

• When U.S. legislation was not enacted, the EU subsequently requested

additional consultations. The United States then agreed to propose

specific legislation amending U.S. rules of origin.

Actions Taken to Comply

• The United States recently enacted legislation that would implement the

rules of origin changes agreed to with the EU.16

1519 U.S.C. § 3592.

16Section 405 of the Trade and Development Act of 2000 (P.L. 106-200).
Appendix I

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Dispute Settlement Cases

Page 80 GAO/NSIAD-00-210 International Trade

Case 32: Korea's Taxes

on Distilled Spirits

Parties

Plaintiff: United States

Defendant: Korea

Outcome

• Both the WTO panel and the Appellate Body ruled against Korea.

Major Case Issues

• The United States complained that Korea imposed lower internal taxes

on soju (a type of alcohol) than on other distilled spirits and liquors,

such as vodka, rum, gin, whisky, and brandy, under its liquor tax laws.

The United States considered the lower tax rate to violate the WTO

principle of national treatment (that foreign goods should not be taxed

less favorably than domestic goods).

• Korea disagreed with this claim and argued, among other things, that

soju did not compete with these other alcoholic beverages.

Case Resolution

• The WTO panel and the Appellate Body both ruled that Korea's tax laws

did violate the WTO national treatment provision because soju and

whiskies, brandies, cognac, rum, gin, vodka, tequila, liqueurs, and

admixtures are directly competitive or substitutable products.

Therefore, both bodies recommended that Korea should bring its laws

into conformity with its national treatment obligations under GATT

1994.

Actions Taken to Comply

• After arbitration on the “reasonable period of time” for Korea to come

into compliance, Korea complied by setting a flat tax rate across all

distilled alcoholic beverages. Korea did this by increasing its taxes on

domestic products rather than lowering them significantly on imported

goods.
Appendix I

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Dispute Settlement Cases

Page 81 GAO/NSIAD-00-210 International Trade

Case 33: Sweden's Civil

Procedures for

Intellectual Property

Parties

Plaintiff: United States

Defendant: Sweden

Outcome

• The United States and Sweden negotiated a mutually agreed solution

resolving the dispute prior to a WTO panel decision.

Major Case Issues

• The United States complained that Sweden failed to make available

provisional measures in civil proceedings involving intellectual

property, as required by TRIPS, such as providing its authorities with the

power to order surprise searches and seizures for relevant evidence.

The U.S. action was intended to address problems involving end-use

piracy of computer software.

Case Resolution

• The United States and Sweden negotiated a solution in which Sweden

indicated that it had passed legislation granting Swedish courts

authority to order searches and seizures, including surprise searches,

for evidence in civil proceedings involving infringements of intellectual

property rights.

Actions Taken to Comply

• The parliament of Sweden passed legislation on November 25, 1998,

amending Sweden's intellectual property rights laws.
Appendix I

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Dispute Settlement Cases

Page 82 GAO/NSIAD-00-210 International Trade

Case 34: U.S.

Antidumping Order on

Color Television

Receivers

Parties

Plaintiff: Korea

Defendant: United States

Outcome

• Korea withdrew its request for a WTO panel after the U.S. Department

of Commerce revoked the antidumping order in question.

Major Case Issues

• Korea complained that the United States determined not to revoke a

long-standing antidumping order on the importation of color television

receivers with respect to the Korean manufacturer Samsung.

• Prior to the WTO case, the Department of Commerce had determined

that it could not complete the revocation review until it completed a

separate review of a petition arguing that Korea was circumventing the

antidumping order by assembling color television receivers in Mexico

and then exporting them to the United States.

Case Resolution

• Korea withdrew its request for a WTO panel after Commerce ceased its

review on the circumvention issue due to lack of domestic industry

interest and subsequently revoked the Samsung antidumping order.

Actions Taken to Comply

• No action required.
Appendix I

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Dispute Settlement Cases

Page 83 GAO/NSIAD-00-210 International Trade

Case 35: India's

Quantitative Import

Restrictions

Parties

Plaintiff: United States

Defendant: India

Outcome

• Both the WTO panel and the Appellate Body ruled against India. India

negotiated an agreement to remove all quantitative import restrictions

by April 2001.

Major Case Issues

• The United States complained that quantitative restrictions maintained

by India (import prohibitions, bans, restrictions, licenses, etc.) on more

than 2,700 agricultural and industrial products violated India's WTO

obligations.

• India justified these restrictions under a WTO provision allowing certain

actions to protect a country's balance-of-payments situation. India

proposed to phase out these measures over a 7-year period; however, no

agreement was reached on this proposal.

Case Resolution

• The panel upheld the U.S. position that India's quantitative restrictions

violated WTO prohibitions. It also concluded that these measures were

not justified under WTO provisions allowing a member to protect its

balance of payments and that India had no right to phase out these

measures. Nevertheless, the panel stated that India did not need to

remove the measures immediately and suggested a negotiated

implementation/phase-out period that could be longer than the normal

15-month period of reasonable time to implement a panel

recommendation.

• India appealed several of the panel's rulings, including whether panels

have the authority to review justification of balance-of-payments

restrictions. India suggested that this authority lay with the WTO

Balance-of-Payments Committee and the General Council. The

Appellate Body upheld the panel on the issues appealed and found that

the panel had the authority to review India's justification for its

balance-of-payments restrictions.
Appendix I

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Actions Taken to Comply

• The United States and India agreed that India would eliminate all

quantitative restrictions by April 2001. Most of the measures had been

removed by April 2000.
Appendix I

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Dispute Settlement Cases

Page 85 GAO/NSIAD-00-210 International Trade

Case 36: U.S.

Antidumping Order on

Korean

Semiconductors

Parties

Plaintiff: Korea

Defendant: United States

Outcome

• The WTO panel ruled against the United States on one issue. Korea is

challenging U.S. compliance.

Major Case Issues

• Korea sought the revocation of an antidumping order on Korean

dynamic random access memory semiconductors with respect to two

producers. Korea claimed that despite the absence of dumping for more

than 3 consecutive years, the United States had not performed a proper

revocation review. They claimed that the United States had not

established the likelihood of dumping in the future and should therefore

revoke the dumping order on Korean dynamic random access memory

semiconductors as a remedy. The Koreans also challenged a series of

U.S. procedures, including the Department of Commerce's standard for

revoking an antidumping order.

Case Resolution

• The WTO panel held that the U.S. standard for revoking an antidumping

order was WTO inconsistent. Specifically, the regulatory requirement

that Commerce find it “not likely” that dumping would occur in the

future was inconsistent with U.S. obligations under the WTO

antidumping agreement. The panel further found that since the

procedure was flawed, the U.S. decision in the revocation review was

also inconsistent. However, the panel rejected all of Korea's other

claims, including the request that the panel suggest revocation of the

antidumping order as the appropriate remedy.

Actions Taken to Comply

• Commerce amended its antidumping regulations, deleting the “not

likely” standard and replacing it with a requirement that the Secretary of

Commerce consider “whether the continued application of the

antidumping duty order is otherwise necessary to offset dumping.” Once
Appendix I

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the regulation had been changed, Commerce proceeded to conduct a

new review of the revocation request. Commerce determined in this

new review that because future dumping was likely, continued

application of the antidumping duty order was necessary.

• Korea challenged the sufficiency of the U.S. compliance efforts. As of

July 1, 2000, the WTO panel had not ruled on the issue.
Appendix I

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Page 87 GAO/NSIAD-00-210 International Trade

Case 37: U.S. Ban on

Imports of European

Poultry

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• The EU and the United States reached a mutually agreed solution

resolving the dispute prior to a WTO panel decision.

Major Case Issues

• In April 1997, the United States imposed a ban on imports of poultry and

poultry products from the EU. The United States maintained that the

ban was necessary because EU authorities had failed to cooperate in

determining whether EU health and safety measures for the marketing

of these products provided levels of protection equivalent to new, more

stringent standards adopted by the United States.

• The EU argued that the United States had failed to clarify the grounds

upon which EU poultry and poultry products had become ineligible for

entry into the U.S. market.

Case Resolution

• The United States obtained EU cooperation in performing an audit of

EU regulatory procedures for handling and marketing poultry products.

The audit concluded that the EU poultry processing facilities and

regulations did indeed provide a level of protection equivalent to that set

forth under U.S. guidelines.

• Following the audit, the United States lifted the poultry ban by

administrative action in August 1997.

Actions Taken to Comply

• No action required.
Appendix I

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Page 88 GAO/NSIAD-00-210 International Trade

Case 38: Mexico's

Antidumping

Determination on High

Fructose Corn Syrup

Parties

Plaintiff: United States

Defendant: Mexico

Outcome

• A WTO dispute settlement panel ruled that Mexico improperly

conducted its analysis in making an antidumping determination. Mexico

has agreed to comply with the panel's ruling.

Major Case Issues

• The United States brought a WTO complaint against Mexico alleging

that Mexico had improperly initiated and investigated an antidumping

case on imports of U.S. high fructose corn syrup. The United States

argued, among other things, that Mexico had not conducted a proper

threat of injury analysis because it had not considered both consumer

and industrial sugar use in its analysis.

• Mexico argued that it had the right to initiate the dumping investigation

and that its methodology for determining threat of injury was proper.

Case Resolution

• Although the panel found that Mexico's initiation of the antidumping

investigation was consistent with its WTO obligations, it ruled that

Mexico's threat of injury determination was inconsistent for several

reasons. First, Mexico inadequately considered the impact of dumped

imports on its domestic industry in part by considering the impact on

only a portion of the industry rather than on the whole industry. Second,

Mexico did not properly determine that there was a likelihood that high

fructose corn syrup imports from the United States would increase. In

addition, the panel found several other instances of improper Mexican

actions: applying its provisional antidumping measure for too long a

period of time, and applying its final measures retroactively.

Actions Taken to Comply

• Mexico has agreed to comply with the panel ruling by September 2000.
Appendix I

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Page 89 GAO/NSIAD-00-210 International Trade

Case 39: Canada Dairy

Subsidies and Quotas

Parties

Plaintiffs: United States and New Zealand

Defendant: Canada

Outcome

• Both the WTO panel and the Appellate Body ruled against Canada

regarding its dual pricing system for dairy imports and the

administration of its tariff-rate quota for milk. Canada is taking action to

comply.

Major Case Issues

• The United States and New Zealand challenged Canada's system of

differential milk prices for domestic and export markets. These

countries insisted that the system was in fact an export subsidy. The

United States also challenged Canada's administration of its TRQ for

fluid milk. As part of its Uruguay Round commitments, Canada had

agreed to reduce subsidies for dairy exports and to establish a TRQ for

fluid milk. In 1995, Canada implemented its new dairy export policy

eliminating direct government subsidies for exports; however, the new

policy established a system of differential pricing of milk based on its

end-use in domestic or export markets.

• Canada argued that the pricing system was producer run and overseen

by provincial marketing boards, without government involvement. Thus,

it was simply a market-driven arrangement for exports, not a subsidy.

Canada also argued that the TRQ for liquid milk was filled by

cross-border purchases and there was no need to allow for commercial

shipments of liquid milk imports.

Case Resolution

• The panel and the Appellate Body ruled in favor of the complainants

with regard to the subsidy issue. The Appellate Body also found that the

Canadian dual-pricing scheme was in fact an export subsidy, even

though the government of Canada was not directly funding the

arrangement. Consequently, Canada would have to count exports under

this arrangement against its subsidy ceiling set in the Uruguay Round.

• The Appellate Body found that Canada could count cross-border

consumer traffic of liquid milk against its TRQ commitment. However,
Appendix I

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Canada had to lift its $20 limit on consignments of liquid milk

consumers may bring over the border.

Actions Taken to Comply

• Canada lifted (by administrative action) the $20 limit on individual,

cross-border consignments of fluid milk. Canada has agreed to come

into compliance with the ruling on subsidies by the end of 2000.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 91 GAO/NSIAD-00-210 International Trade

Case 40: U.S. Tax

Treatment for U.S.

Foreign Sales

Corporations

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• Both the WTO panel and the Appellate Body ruled against the United

States.

Major Case Issues

• The EU complained that the U.S. Foreign Sales Corporations (FSC)17

program provides export subsidies and import substitution subsidies

prohibited by the WTO subsidies agreement because (1) it exempted

from direct taxes a portion of income related to exports and dividends

distributed to U.S. parent companies, (2) it required that the program's

tax exemption be limited to receipts from the export of products having

at least 50-percent U.S. origin by market value, and (3) its administrative

pricing rules gave companies several options for allocating income

between the foreign sales corporation and the parent company. The EU

also alleged that the program is an export subsidy that violated the

Agreement on Agriculture.

• The United States responded that the FSC program was not an export

subsidy and that under its WTO obligations, foreign-source income may

be exempt from taxation or taxed to a lesser extent than

domestic-source income. The United States asserted that the program's

provisions were intended to provide a limited, territorial-type system of

taxation for U.S. exports, comparable to that received by EU firms. The

United States argued that agreements reached under GATT prior to the

formation of the WTO exempted the FSC program.

Case Resolution

• The panel and Appellate Body found that the FSC tax exemption

measure was a prohibited subsidy under the Subsidies agreement

17 Foreign sales corporations are foreign corporations responsible for certain sales-related

activities regarding the sale or lease of goods produced in the United States for export

outside the United States.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 92 GAO/NSIAD-00-210 International Trade

because the benefits constituted revenues otherwise due to the

government and were contingent on export performance.

• The Appellate Body also found that the United States had acted

inconsistently with its obligations under the Agreement on Agriculture

by applying export subsidies in a way that circumvented or could

circumvent its export subsidy commitments for agriculture products.

• Neither the panel nor the Appellate Body ruled on the 50-percent U.S.

origin requirement or the FSC administrative pricing rules.

Actions Taken to Comply

• The United States has until October 1, 2000, to comply with the panel

ruling.
Appendix I

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Dispute Settlement Cases

Page 93 GAO/NSIAD-00-210 International Trade

Case 41: Imports of

Canadian Cattle,

Swine, and Grain

Parties

Plaintiff: Canada

Defendant: United States

Outcome

• Canada and the United States reached an agreement resolving the

dispute prior to a WTO panel decision.

Major Case Issues

• In its request for consultations, Canada complained that new inspection

requirements imposed by Idaho, Montana, North and South Dakota,

Nebraska, and Minnesota on Canadian trucks carrying cattle, hogs, and

grain passing through their states violated various WTO provisions. A

number of trucks that failed to meet the new requirements were denied

access to these states. Canada claimed that the state inspections were

unjustified because Canadian livestock and grain exports had already

met all U.S. federal health and safety requirements.

• The states claimed the inspections were undertaken for health and

safety purposes.

Case Resolution

• In October 1998, the five states involved in the dispute with Canada

agreed to suspend their inspections, and in December 1998 the United

States and Canada reached a bilateral agreement on the matter. In

addition to the suspension of the inspections, the agreement provided

for improved U.S. access to the Canadian market for live animals and

grains by reducing burdensome Canadian plant and animal health

requirements. Canada also agreed to regular consultations on U.S. grain

exports to ensure that they are priced fairly.

Actions Taken to Comply

• The governors of the states involved suspended inspections.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 94 GAO/NSIAD-00-210 International Trade

Case 42: Provisions of

the U.S. Trade Act of

1974

Parties

Plaintiff: European Union

Defendant: United States

Outcome

• The WTO panel ruled in favor of the United States.

Major Case Issues

• The EU complained that by adopting and applying sections 301-310 of

the U.S. Trade Act of 1974,18 the United States breached an

understanding that in exchange for other Uruguay Round participants

agreeing to automatic adoption of WTO panel and Appellate Body

reports and authorization of members to suspend concessions, the

United States would abandon its long-standing policy of taking

unilateral action against foreign trade barriers. More particularly, the EU

claimed that a number of specific, strict time limits in sections 304-306

did not allow the United States to comply with WTO dispute settlement

rules and GATT 1994 obligations.

• The United States responded that the EU had brought a political case

based on a series of assumptions adverse to the United States. The

United States contended that sections 301-310 permit it to comply with

dispute settlement rules and procedures in every case: section 304

permits the USTR to base his or her determinations on adopted panel

findings, and sections 305 and 306 permit the USTR to request and

receive WTO authorization to suspend concessions.

Case Resolution

• The panel found that the terms of sections 304-306, considered alone,

were inconsistent with dispute settlement rules by providing the United

States with discretion to make certain determinations before the

completion of panel proceedings. However, this inconsistency was

removed by the Statement of Administrative Action accompanying the

Uruguay Round Agreements Act and U.S. representations to the panel

1819 U.S.C. §§ 2411-2420. These provisions address foreign unfair trade practices affecting

U.S. exports of goods or services.
Appendix I

Summaries of 42 World Trade Organization

Dispute Settlement Cases

Page 95 GAO/NSIAD-00-210 International Trade

that USTR would base any section 301 determination that there has

been a violation or denial of U.S. rights under a WTO agreement on a

dispute settlement finding.

• Notwithstanding these rulings, the panel stated that should the relevant

U.S. representations both in the Statement of Administrative Action and

before the panel be repudiated, its findings of conformity between the

provisions in sections 304-306 and U.S. WTO obligations would no

longer be warranted.

Actions Taken to Comply

• No action required.
Page 96 GAO/NSIAD-00-210 International Trade

Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases ApendxiI

We examined the commercial stakes and outcomes of each of the 42

completed dispute settlement cases involving the United States (see

app. III for more information on our methodology). Table 2 presents a

summary of the commercial outcome of the cases, while table 3 presents a

short description of each of these cases, giving information—when

available—on the particular barriers or measures contested, the market

size, the relevant trade or investment involved, and other indicators of the

commercial relevancy of the cases to the United States.

Table 2: Commercial Outcome of WTO Dispute Settlement Cases Involving the United States, 1995 Through March 16, 2000

GAO case

number Case name Commercial outcome of case

1 U.S. regulations affecting gasoline imports Primarily environmental concerns; economic effects limited

2 Korea's agricultural shelf-life standards U.S. achieved commercial benefits through greater market access

3 U.S. import duties on automobiles from

Japan

Potentially high commercial stakes, but outcome had limited or no

commercial effect

4 Japan's taxes on distilled spirits U.S. achieved commercial benefits through greater market access

5 European Union grain tariffs U.S. achieved commercial benefits through greater market access

6 European Union banana import regime Limited commercial benefits because defendant did not comply

7 U.S. underwear import restraint Restraints removed, with limited commercial effect

8 European Union ban on meat from

hormone-treated animals

Limited commercial benefits because defendant did not comply

9 Japan sound recordings U.S. achieved commercial benefits through stronger intellectual property

protection

10 Canada's measures on magazines U.S. achieved commercial benefits through greater market access

11 U.S. wool coat import restraint Restraints removed, with limited commercial effect

12 U.S. wool shirt import restraint Restraints removed, with limited commercial effect

13 Hungary's agricultural export subsidies Limited commercial benefits because challenge brought primarily to uphold

trade principles

14 Pakistan patent mailbox provision U.S. achieved commercial benefits through stronger intellectual property

protection

15 Portugal patent protection U.S. achieved commercial benefits through stronger intellectual property

protection

16 U.S. Helms-Burton Act Potentially high commercial stakes, but outcome had limited or no

commercial effect

17 U.S. tariff retaliation on European Union

products

Potentially high commercial stakes, but outcome had limited or no

commercial effect

18 Turkey's taxation of foreign films U.S. achieved commercial benefits through greater market access

19 Japan's import measures affecting film U.S. failed to achieve greater market access
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 97 GAO/NSIAD-00-210 International Trade

a

Antidumping duties are imposed on imports to neutralize the injurious effect of unfair pricing practices

known as “dumping.”

20 U.S. antidumpinga investigation on Mexican

tomatoes

Potentially high commercial stakes, but outcome had limited or no

commercial effect

21 India patent mailbox provision U.S. achieved commercial benefits through stronger intellectual property

protection

22 Brazil's automobile regime Limited commercial benefits because challenge brought primarily to uphold

trade principles

23 Argentina duties on textiles, apparel, and

footwear

Limited commercial benefits due to other barriers

24 Australia automotive leather export

subsidies

Limited commercial benefits partly due to delayed compliance

25 U.S. ban on shrimp imports to protect

turtles

Primarily environmental rather than economic concerns

26 Indonesia automobile and auto parts

measures

U.S. achieved commercial benefits through greater market access

27 European Union customs classification of

computer equipment

Despite losing case, market access maintained through separate

agreement

28 U.S. antidumping order on urea Duties removed, with limited commercial effect

29 Philippines pork and poultry tariff-rate

quotasb

U.S. achieved commercial benefits through greater market access

30 Japan's measures affecting fruit imports U.S. achieved commercial benefits through greater market access

31 U.S. textiles and apparel rules of origin Settled, with limited commercial effect

32 Korea's taxes on distilled spirits Limited commercial benefits due to other barriers

33 Sweden's civil procedures for intellectual

property

U.S. achieved commercial benefits through stronger intellectual property

protection

34 U.S. antidumping order on color television

receivers

Duties removed, with limited commercial effect

35 India's quantitative import restrictions U.S. achieved commercial benefits through greater market access

36 U.S. antidumping order on Korean

semiconductors

Limited or no commercial effect because duties maintained

37 U.S. ban on imports of European poultry Ban removed, with limited commercial effect

38 Mexico's antidumping determination on

high fructose corn syrup

Implementation deadline not yet passed

39 Canada dairy subsidies and quotas Limited commercial benefits because other barriers existed

40 U.S. tax treatment for foreign sales

corporations

Potentially high commercial stakes, but implementation deadline not yet

passed

41 U.S. imports of Canadian cattle, swine, and

grain

Measures removed, with limited commercial effect

42 Provisions of the U.S. Trade Act of 1974 Potentially high commercial stakes, but U.S. prevailed

(Continued From Previous Page)

GAO case

number Case name Commercial outcome of case
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 98 GAO/NSIAD-00-210 International Trade

b

A tariff-rate quota is the application of a lower tariff rate for a specified quantity of imported goods.

Imports above this specified quantity face a higher tariff rate.

Source: GAO analysis.

Table 3: Commercial Significance of Completed U.S. Cases in the WTO, 1995-2000

GAO case

number Case name Commercial significance

1 U.S. regulations

affecting gasoline

imports

This dispute involved Environmental Protection Agency environmental regulations on imports of

finished gasoline products. Imports of finished gasoline account for generally less than 5 percent of the

more than $2 billion U.S. market, and the particular imports entering the market under the modified

rules account for only 0.18 percent of the market. Also, the regulation remains in place with

modifications, so the economic effects of the outcome of this dispute are likely to be limited for the

United States. However, for the East Coast, imports of finished gasoline have typically represented

between 10 and 20 percent of supplies. Also, imports have fluctuated somewhat over the past 4 years,

and the regulation may have affected the choice of suppliers from which the United States imports. For

certain importers, such as Venezuela, whose largest market is the United States, the commercial

consequences of the dispute are potentially important.

2 Korea's

agricultural

shelf-life standards

This dispute involved a U.S. challenge of Korea's determination of shelf-life standards for several types

of agricultural products. Korean requirements adversely affected vacuum-packed chilled beef and pork;

frozen meat; other frozen foods; and other dried, packaged, canned, or bottled products. The

Department of Agriculture's Economic Research Service estimated, based on Japanese meat

consumption and demographics as proxies for Korea, that losses for chilled beef were between

$87 million and $99 million and for chilled pork were between $79 million and $156 million in 1994. The

United States and Korea resolved this dispute through consultations, and Korea modified its shelf-life

requirements. Korea is one of the U.S.' top markets for exports of beef and pork products, receiving

about 17 percent (about $350 million) of U.S. worldwide exports of these products in 1999.

3 U.S. import duties

on automobiles

from Japan

This dispute involved a Japanese challenge of U.S. import duties to be imposed on imports of Japanese

luxury vehicles. Under section 301 of the 1974 U.S. Trade Act, the USTR had determined that the

Japanese government had constructed barriers to U.S. exports in the Japanese “aftermarket” for

replacement auto parts and accessories that were burdening or restricting U.S. commerce. It was

announced that 100 percent duties were to be placed on specific luxury models of Honda, Toyota, and

other Japanese exports valued at $5.9 billion in 1994. After two rounds of bilateral negotiations, the

United States and Japan announced a bilateral agreement on autos and auto parts. This bilateral

agreement resolved the U.S. section 301 case, and Japan did not pursue its WTO challenge to the

duties.

4 Japan's taxes on

distilled spirits

This dispute had commercial benefits for the United States. Japan is one of the leading export markets

for U.S. distilled spirits, receiving about 18 percent ($77 million) of U.S. exports of these products in

1999. As a result of the settlement, tax rates on whiskey and other distilled spirits were reduced, and

tariffs on these products are being eliminated at an accelerated rate beginning in 1997. The U.S.

industry has expressed satisfaction with the outcome, estimating $94 million in annual tax and tariff

savings. Between 1997 and 1998, exports of whiskey (the largest U.S. distilled spirit export to Japan)

increased by 18 percent ($10 million) to $67 million.
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 99 GAO/NSIAD-00-210 International Trade

5 European Union

grain tariffs

This dispute concerned the EU's calculation of duties on U.S. exports of grains (such as rice, wheat,

rye, barley, corn, and sorghum). The United States was concerned about U.S. access of high-value rice

and certain barley exports to the EU. The dispute was resolved in 1997, with the EU agreeing to modify

its system and to rebate excessive charges and reduce tariffs on certain rice exports. The EU imported

over $300 million in U.S. grains in 1999. U.S. exports of the particular rice affected by the higher duties

ranged between $50 million and $75 million annually from 1996 through 1999. Also, the EU accounted

for 13 percent of U.S. rice exports and was the U.S.' third largest regional market after North America

and Japan in 1999. In addition to changes made for rice exports, the EU also agreed to establish a

tariff-rate quota for barley imports intended to maintain market access for U.S. exports.

6 European Union

banana import

regime

This dispute involved restrictions on the access and marketing of bananas from certain countries by the

EU that the United States (along with four other countries) challenged as WTO inconsistent. The case

affects the interests of U.S. companies that distribute bananas in the EU. The WTO agreed with the

arguments of the plaintiffs and requested that the EU modify its banana regime. Following some

changes the EU made, the WTO ruled that these were insufficient, determining that damages to the

United States from the EU's regime amounted to $191.4 million. This is the amount of retaliation the

WTO authorized the United States to impose on EU exports to the United States.

7 U.S. underwear

import restraint

This dispute involved Costa Rica's challenge to a U.S. import restraint on underwear. The U.S.

Committee for the Implementation of Textile Agreements found that certain imports of Costa Rican

underwear were causing serious damage to the U.S. industry and decided to impose an import

restraint. Imports of these products in 1994 were approximately $87 million, accounted for 15 percent of

all imports of underwear, and were up 22 percent in terms of quantity over the previous year. Imports of

Costa Rican underwear were equivalent to about 8.8 percent of U.S. underwear production in the year

ending September 1994. Costa Rica appealed the decision to the Textile Monitoring Body, which did not

find serious damage and could not reach a consensus on whether there was a threat of serious

damage. The restraint remained in place for 2 years but was allowed to expire, as a result of a WTO

decision against the United States .

8 European Union

ban on meat from

hormone-treated

animals

This dispute is part of a long-running quarrel between the United States and the EU over EU

restrictions on imports of beef produced from hormone-treated cattle. The United States originally

challenged this ban through section 301 sanctions in 1989, then through the WTO dispute settlement

procedures in 1996. The WTO agreed with the arguments of the United States that the EU had

improperly restricted imports and set a damage figure of $116.8 million. This is the amount of retaliation

that the WTO authorized the United States to impose on EU exports to the United States.

9 Japan sound

recordings

This dispute involved the failure of Japan to extend copyright protections for existing sound recordings

back a full 50 years as the WTO agreement on intellectual property required. The successful settlement

of this dispute provided direct economic benefits to the United States and may have assisted in

resolving similar disputes with other countries. Based on actual sales in the Japanese market at the

time, U.S. industry estimated losses of approximately $500 million. In addition to granting protections in

the large Japanese market, industry representatives cited this case as useful in securing retroactive

protections in other countries for sound recordings and classic motion pictures. The U.S. recorded

music industry informed USTR that it had world-wide foreign sales of over $15 billion in 1995.

(Continued From Previous Page)

GAO case

number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 100 GAO/NSIAD-00-210 International Trade

10 Canada's

measures on

magazines

This dispute involved removing restrictions on access by U.S. publishers to the Canadian magazine

market. In addition to Time-Warner ceasing production of a Canadian edition of Sports Illustrated, a

prohibitive excise tax that Canada imposed was designed to deter entry of more than 100 potential U.S.

“split-run” publications that had been identified by a Canadian task force. Under an agreement reached

between Canada and the United States in 1999, Canada agreed to remove the ban and excise tax and

to allow increased investment in existing Canadian magazines or wholly owned new publications. The

advertising revenue of magazines published in Canada was about $470 million in 1996-97, according to

Canada's statistical agency. The Canadian government reported in 1998 imports of U.S. periodicals of

about $593 million. Industry sources believe that the bilateral agreement creates new opportunities in

Canada and say that the market may grow with more competition. Canada has enacted some of the

changes agreed to under the agreement, while others are still pending.

11 U.S. wool coat

import restraint

This dispute involved India's challenge to a U.S. import restraint on wool coats in 1995. The U.S.

Committee for the Implementation of Textile Agreements found that certain imports of wool coats were

causing serious damage to the U.S. industry. Imports of these products in 1994 were approximately

$4.6 million, up 402 percent in terms of quantity over the previous year. Indian wool coats accounted for

3.1 percent of all imports of wool coats and were equivalent to about 4.1 percent of U.S. wool coat

production for the 12-month period ending in September, 1994. India referred the U.S. decision to

impose an import restraint to the Textile Monitoring Body, which did not find serious damage and could

not reach consensus on whether there was a threat of serious damage to U.S. industry. India dropped

its WTO dispute after the United States removed the restraint.

12 U.S. wool shirt

import restraint

This dispute involved India's challenge to a U.S import restraint on wool shirts and blouses in 1995. The

U.S. Committee for the Implementation of Textile Agreements found that certain imports of wool shirts

and blouses were causing serious damage to the U.S. industry. India wool shirt and blouse imports

from February 1993 through January 1994 were approximately $7 million, up 414 percent in terms of

quantity over the previous year. Imports of wool shirts and blouses from October 1993 through

September 1994 were about equal to U.S. wool shirt and blouse production. India challenged the U.S.

decision to impose an import restraint in the Textile Monitoring Body, which did find a threat of serious

damage. Although India prevailed in its subsequent challenge before the WTO panel and Appellate

Body, the Committee removed the restraint prior to the WTO decisions due to a steady decline in

imports. U.S. imports of wool shirts and blouses from India have remained between about $1 million

and $3 million annually from 1995 to 1999.

13 Hungary's

agricultural export

subsidies

This dispute involved a challenge to Hungary's failure to comply with its negotiated commitments

following a change in government. The United States and several other WTO members were concerned

that Hungary had increased its export subsidies for agriculture above the levels it had committed to in

the Uruguay Round. The economic stakes for the United States were minimal. U.S. government officials

pointed out that U.S. producers and exporters do not face much direct competition from Hungarian

agricultural exports. However, the case was important in demonstrating that WTO members could not

arbitrarily violate their export subsidy reduction commitments.

14 Pakistan patent

mailbox provision

This dispute involved the failure of Pakistan to establish procedures allowing companies to file patent

applications on pharmaceutical and agricultural chemicals, and providing exclusive marketing rights.

The successful resolution of this dispute offers potential economic benefits to the United States and

may be useful in encouraging other developing countries besides Pakistan to fully enforce their WTO

commitments. Less than 1 percent of the $8.8 billion in U.S. world exports of pharmaceuticals currently

go to Pakistan ($3.3 million in 1999). Estimates of the overall size or potential of the Pakistani

pharmaceutical and agricultural chemical markets are not available. However, the United States is one

of the leading exporters of these products, and developing countries are beginning to implement

stronger intellectual property protections as part of their WTO commitments.

(Continued From Previous Page)

GAO case

number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 101 GAO/NSIAD-00-210 International Trade

15 Portugal patent

protection

This dispute involved Portugal's failure to provide retroactive protection for patents consistent with WTO

obligations. This increase in patent terms affected approximately 7,000 patents, according to a U.S.

Patent and Trademark Office official. The United States, as a major exporter of intellectual property,

should benefit economically from this change, though exact figures are not available. Less than

1 percent of the $8.8 billion in U.S. world exports of pharmaceuticals currently go to Portugal

($7.7 million in 1999).

16 U.S. Helms-Burton

Act

This dispute involved an EU complaint about what the EU saw as the extraterritoriality of U.S. sanctions

against Cuba. The EU was concerned about the commercial impact of these sanctions on EU interests.

The United States has frequently used economic sanctions. For instance, as of 1998, the United States

had in effect 42 separate statutes authorizing or setting forth economic sanctions on 29 countries,

according to a U.S. International Trade Commission study.

17 U.S. tariff

retaliation on

European Union

products

This dispute involved a 1996 EU challenge to duties placed on EU exports to the United States since

1989. The duties were imposed under section 301 in response to the EU ban on beef from

hormone-treated animals. The United States removed these duties in July 1996, citing the initiation of a

challenge to the ban under the WTO's new dispute settlement procedures. One estimate places the

value of the duties removed at approximately $100 million, covering tomatoes, wine coolers, and beef.

The WTO ruled in favor of the United States on the EU's ban on hormone-treated beef in 1998, and

after the EU failed to comply the United States initiated retaliation of $116.8 million on EU exports to the

United States.

18 Turkey's taxation of

foreign films

This dispute involved discriminatory taxes Turkey placed on foreign films. The United States challenged

the 25 percent tax on foreign films, and Turkey agreed to equalize taxes across films by lowering the

rate on foreign films. The U.S. industry noted that Turkey is the largest market for films in the Middle

East, with 1999 revenues of $23 million. Revenues in 1998, the year following the removal of the tax,

nearly doubled over the average of the previous 3 years, while the regional average only rose by

10 percent. Also, the successful resolution of this dispute was cited by U.S. industry as useful in

discussions with other countries with similar measures.

19 Japan's import

measures affecting

film

The dispute involved large, but unrealized, economic benefits for the United States. Japan is the second

largest market in the world for photographic film and paper products. In 1999 Japanese industry

estimated that the size of the market was between $2.5 billion and $3 billion. Kodak argued that the

Japanese government had fostered barriers to market access and distribution in Japan. Kodak

estimates that its exports of film account for approximately 7 to 10 percent of the Japanese market,

whereas it commands about a 44 percent share in the rest of the world. The WTO found insufficient

evidence that actions by the Japanese government had limited Kodak's access to the market. Kodak

reported that in 1999 it exported over $360 million in film and paper products to Japan either directly

from the United States or after processing in third countries.

20 U.S. antidumping

investigation on

Mexican tomatoes

This dispute involved Mexico's challenge to the initiation of a U.S. antidumping order on imports of fresh

tomatoes. The U.S. International Trade Commission reported that imports of Mexican fresh tomatoes

were $452 million, or almost 36 percent, of the $1.3 billion U.S. market in 1995. The Department of

Commerce and the U.S. International Trade Commission made preliminary determinations that the

Mexican imports were being sold at less than their fair value and were causing material injury to the

U.S. industry. If the final determinations had upheld these findings, Commerce could have placed duties

on these imports to raise their price up to the fair market value. Mexico requested WTO consultations

about this issue. However, Commerce resolved the matter with a formal commitment by Mexican

growers not to sell their exports below a certain price. This agreement was reached to eliminate the

injurious effects of the dumped imports on the U.S. industry.

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number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

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21 India patent

mailbox provision

This dispute involved the failure of India to establish procedures allowing companies to file patent

applications on pharmaceutical and agricultural chemicals, and providing exclusive marketing rights.

The successful resolution of this dispute offers potential economic benefits to the United States and

may be useful in encouraging other developing countries to fully enforce their own WTO commitments.

Exact estimates of the value of the Indian pharmaceutical and agricultural chemical markets are not

available, but preliminary U.S. industry estimates on a limited sample of pharmaceuticals show lost

sales near $100 million. Also, the Indian pharmaceutical market is one of the larger developing country

markets. The United States is a major exporter of pharmaceutical products ($8.8 billion in worldwide

exports in 1999), but less than 1 percent currently go to India ($11.4 million in 1999).

22 Brazil's automobile

regime

This dispute involved access to and investment in the Brazilian auto market by U.S. auto companies.

Brazil instituted several measures under its auto program that discouraged imports by firms not

invested in Brazil and provided benefits to those that were. U.S. exports of autos and auto parts to

Brazil are limited, and major U.S. automakers were already invested in Brazil and receiving the benefits

of the program. However, smaller U.S. firms were not invested in Brazil, and the major U.S. automakers

that were had WTO-inconsistent conditions attached to their investments. Brazil resolved the dispute

with the United States by committing to eliminate the WTO-inconsistent aspects of the program by

specific dates and to not extend the program into a Mercosura

-wide auto regime. Brazil was a large

recipient of U.S. auto investment. U.S. firms initiated investments in Brazil of over $2 billion during 1995

and 1996 and announced plans for several billion more by this year. Those investments were primarily

for production and sale of autos and auto parts in Brazil and the South American regional economy.

U.S. auto and auto parts exports to Brazil in 1998 were $101 million and $954 million, respectively—

only 0.4 and 2 percent of U.S. worldwide exports of these products.

23 Argentina duties

on textiles apparel,

and footwear

This dispute involved a U.S. challenge of Argentina's calculation of duties and imposition of taxes on

U.S. exports of various textiles, apparel, and footwear. The WTO found in favor of the United States, and

Argentina complied with the decision. Duties that were previously above Argentina's 35-percent tariff

commitment must conform to this level, and a statistical tax was found inconsistent. Argentina complied

by replacing the WTO-inconsistent duties with ones that met their obligations and by raising lower rates

to their higher bound rates to compensate for lost revenue. As a result, Commerce Department officials

expected these changes to have minimal effect on trade.

24 Australia

automotive leather

export subsidies

This dispute, which concerns the removal of Australian export subsidies to its sole automotive leather

producer, was just recently resolved. Australia's manufacturer received a prohibited export subsidy of

30 million Australian dollars (about $22.3 million) in 1997. U.S. domestic producers of automotive

leather are concerned about competing with subsidized exports in the U.S. and world markets. U.S.

industry estimates that the U.S. automotive leather market was $750 million in 1999 and has been

growing steadily. Although a WTO panel found in favor of the United States, the panel later ruled that

Australia had not complied with the panel's decision requiring the repayment of the subsidy. Australia

and the United States then negotiated a solution under which the subsidy recipient agreed to a partial

repayment of the subsidy, and Australia agreed to exclude automotive leather from any future subsidies

or subsidy programs.

25 U.S. ban on shrimp

imports to protect

turtles

This dispute involved U.S. restrictions on imported shrimp caught in a way that did not adequately

protect sea turtles. It had limited economic consequences for the United States. The United States

imported over $3 billion worth of shrimp in 1998, about 89 percent of the total supply of shrimp in the

United States. The share of imports in total supply has actually risen since 1995 despite the import

restrictions and decreased exports by some countries. Therefore, the restrictions have potentially

affected the source of U.S. imports but not necessarily the overall size of these imports. Malaysia, which

was not certified by the State Department as meeting the requirements for protecting sea turtles, saw

its exports fall in 1997 and 1998, while Thailand, which is certified, has seen its exports rise.

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number Case name Commercial significance
Appendix II

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Dispute Settlement Cases

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26 Indonesia

automobile and

auto parts

measures

This dispute involved access to and investment in the Indonesia auto market by U.S. auto producers.

Indonesia instituted several measures under its auto programs that discriminated against imports and

provided benefits to domestic firms over foreign-owned producers. U.S. direct exports of autos and auto

parts to Indonesia were only $2.1 million and $38 million in 1998, respectively—less than 1 percent of

U.S. world exports of these products. However, U.S. automakers had intended to invest approximately

$750 million in Indonesia to integrate Indonesia into a wider network of production in Southeast Asia.

Also, final products produced in Indonesia and the region would be marketed in Indonesia. Indonesia

has complied with the WTO decision by modifying its auto regime.

27 European Union

customs

classification of

computer

equipment

This dispute involved a change in the tariffs U.S. exports to the EU faced in 1995 on certain computer

networking equipment and computers with multimedia capability. It had potentially large economic

consequences for U.S. producers. Although the United States lost its challenge to the EU's increase in

tariff rates, negotiations occurring at the same time on the Information Technology Agreement ended up

leading to the removal of tariffs on January 1, 2000, on the products involved. The European market for

computer networking equipment totaled over $5 billion in sales annually, and U.S. companies

accounted for more than half of the market. The United States had said that by reclassifying these

products, the EU had raised the tariffs on certain equipment from 2 percent to 7.5 percent and on

personal computers from 3.5 percent to 14 percent.

28 U.S. antidumping

order on urea

This dispute involved the EU's challenge to a 1987 U.S. antidumping order that had remained in place

on imports of urea, a chemical compound used in fertilizers and animal feed, from regions of Germany

formerly a part of the German Democratic Republic. Citing lack of U.S. industry interest, Commerce

completed a changed circumstances review and dropped the dumping order, thus ending the case. The

original antidumping order placed a 44.88 percent duty on urea imports from the German Democratic

Republic. The U.S. International Trade Commission reported that imports of urea from the German

Democratic Republic in 1986 were about $14.6 million, or 2.4 percent of the over-$600 million U.S.

market.

29 Philippines pork

and poultry

tariff-rate quotas

This dispute involved access to the Philippine market by imported pork and poultry products. The

United States challenged the failure of the Philippines to implement a tariff-rate quota system under its

WTO obligations. The dispute was settled through consultations and a Philippine commitment in 1998

to administer its tariff-rate quota system so as to improve access to its market. U.S. exports of poultry

products to the Philippines increased from about $2 million in 1998 to about $18 million in 1999. U.S.

pork exports also increased from about $1.4 million in 1998 to about $2.2 million in 1999.

30 Japan's measures

affecting fruit

imports

This dispute involved a U.S. challenge to a Japanese requirement that individual varieties of fruits, such

as apples, nectarines, and cherries, be inspected before entry into the Japanese market. The WTO

agreed with the U.S. challenge, and Japan removed the ban on five varieties of apples and five varieties

of cherries in July 1999. The Agriculture Department estimated that exports of these products could

increase by $50 million as a result of the removal of the bans. In December 1999 and March 2000,

shipments of two varieties of apples entered the Japanese market. However, these and the other

varieties still face costly inspection certification requirements (distinct from the varietal testing issue).

The United States exported about $1 million in fresh apples and almost $90 million in fresh cherries to

Japan in 1999.

31 U.S. textiles and

apparel rules of

origin

This dispute involved an EU challenge to a U.S. change in its rules of origin, which affect imports of

textile products. The EU contended that the change adversely affected its fabrics, scarves, and other

flat textile products shipped to the United States by categorizing them as non-EU and thus subject to

textile quotas. The United States and the EU settled the dispute in August 1999, and the United States

enacted legislation in May 2000 that confers EU origin to certain products if they were both dyed,

printed, and subject to additional finishing operations in the EU. U.S. imports from the EU of cotton or

certain manmade fiber printed fabrics were over $7 million, and U.S. imports of silk printed fabrics were

over $18 million in 1999.

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number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

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32 Korea's taxes on

distilled spirits

This dispute involved discriminatory taxes that Korea leveled against imports of distilled spirits that

competed with soju, which were domestically produced. It was a legal victory for the United States but

had limited economic benefits. Korea complied with its WTO obligations primarily by raising the taxes it

charged on soju to a rate equal to taxes on other distilled spirits. Tax rates on imported distilled spirits

were lowered, but the U.S. industry contends that rates, although nondiscriminatory, still remain too

high to provide effective market access. The U.S. industry considers Korea a potentially large market for

exports. However, U.S. exports to Korea of distilled spirits (about $1 million in 1999) represent less than

1 percent of all U.S. exports of these goods. Also, despite recent increases in U.S. exports since the

Asian financial crisis, U.S. exports of distilled spirits to Korea still remain below 1996 levels.

33 Sweden's civil

procedures for

intellectual

property

This dispute involved improving the enforceability of intellectual property rights in Sweden. The

successful resolution of this dispute may help to reduce piracy of software products, offering

commercial benefits to U.S. producers. The U.S. business software industry was concerned about its

ability to conduct surprise searches for pirated software. U.S. industry estimated that Sweden had sales

of business personal computer application software of $313 million and a piracy rate of 38 percent

(compared with Western Europe's average of 36 percent), resulting in $119 million in revenue losses in

1998. Worldwide, the U.S. industry reported revenues on business personal computer application

software of $17.8 billion in 1998 and estimated that it had lost about $11 billion to piracy that same year.

The resolution of this dispute has also been useful in negotiations with other northern European nations

that also did not permit the surprise searches the industry sought.

34 U.S. antidumping

order on color

television receivers

This dispute involved a Korean challenge to a 1984 U.S. antidumping order on color television imports.

Following a change in interest by U.S. industry, the Commerce Department revoked the duty. The

original antidumping order placed duties ranging from less than 1 percent to over 16 percent on imports

of color television receivers from Korea. Imports from Korea accounted for $108 million in 1982,

2.8 percent of the $3.9-billion U.S. market.

35 India's quantitative

import restrictions

This dispute involved a U.S. challenge to India's use of WTO balance-of-payments provisions to justify

import restrictions and bans. The WTO agreed with the U.S. challenge, and India began removing these

restrictions. The barriers covered 2,700 tariff lines of goods, about one third of India's entire tariff

schedule. Removal of such a large number of quantitative restrictions should provide greater market

access for U.S. exporters. Under an agreement reached on implementation, India removed 1,999 of the

2,700 by April 1, 2000. The remaining barriers are scheduled to be removed by April 1, 2001. However,

India negotiated with the United States increases in its bound rates on some agricultural products in

exchange for greater access for others, according to USTR. Also, India may choose to increase some

tariff rates up to their bound rates to compensate for the removal of the barriers.

36 U.S. antidumping

order on Korean

semiconductors

This dispute involved a Korean challenge of a 1993 U.S. antidumping order on dynamic random access

memory semiconductors. The original antidumping order found that some Korean producers of certain

semiconductors were selling their products in the U.S. market at less than fair value and caused

material injury to the U.S. industry. Duties were imposed on a portion of the nearly $730,000 of imports

from Korea in 1991. These comprised about 30 percent of all imports of dynamic random access

memory semiconductors. Imports in turn made up about 71 percent of the $3.4 billion U.S. market. In

response to the WTO panel ruling, although Commerce modified one of its revocation review

procedures, it completed a review under the new procedure and determined that the antidumping

duties should remain in effect.

37 U.S. ban on

imports of

European poultry

This dispute involved an EU challenge to a Department of Agriculture ban on imports of poultry

products until negotiations on health and safety standards were completed. The ban was initiated in

April 1997 and was removed in August following inspections of EU facilities by Agriculture. Agriculture

officials said that importers of the particular products affected were aware of the possibility of the ban

and had increased inventories. Therefore, they believe the ban had very little impact on actual trade

flows. U.S. imports of the poultry products affected were about $1,940,000 in 1997, down slightly from

about $1,980,000 in 1996.

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number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

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38 Mexico's

antidumping

determination on

high fructose corn

syrup

This dispute involved a U.S. challenge to Mexico's initiation of an antidumping investigation on U.S.

exports of high fructose corn syrup, a sugar substitute. The WTO agreed with the U.S. challenge. A

successful resolution of this case, which has not yet been completed, offers potential commercial

benefits to U.S. producers. Following the imposition of duties ranging between 60 and 102 percent in

1997 and 1998 on certain types of high fructose corn syrup, U.S. exports have fallen from a peak of

about $63 million in 1997 to about $55 million in 1999. However, both these figures are well above the

$27 million (or less) the United States exported prior to 1996. U.S. exports of high fructose corn syrup

command about 7 percent of the Mexican sweetener market (sugar and high fructose corn syrup),

based on estimates from the U.S. Foreign Agricultural Service. Mexico has agreed to comply with the

panel ruling by September 2000.

39 Canada dairy

subsidies and

quotas

This dispute involved a U.S. challenge to Canada's subsidies on exports of dairy products and

limitations on market access in Canada for fluid milk. The commercial benefits of the successful WTO

ruling for the United States are likely to be limited, but the case was important to deter any

circumvention of the export subsidy reduction commitments on agricultural products. The Department

of Agriculture estimated that the economic consequences of the reduction in Canadian exports of

subsidized dairy products will be minimal since Canada accounts for less than 1 percent of dairy

products traded internationally, and exports to the United States account for only 0.2 percent of U.S.

milk production. Under an agreement reached with the United States and New Zealand, Canada will

comply immediately with its WTO export subsidy commitments on butter, skimmed milk powder, and an

array of other dairy products. Beginning in the 2000-2001 market year, Canada will reduce its exports of

subsidized cheese to a level that is less than half of the volume exported in recent years. The WTO also

found that Canada was improperly implementing its tariff-rate quota on fluid milk. U.S. industry officials

estimated greater access could bring an additional $45 million in sales to the U.S. dairy business.

However, the two countries do not currently export fluid milk to each other (except in retail-size

containers) because of ongoing work on developing equivalency measures on health, sanitation, and

inspection standards.

40 U.S. tax treatment

for foreign sales

corporations

This dispute involved an EU challenge to U.S. tax laws that allowed exemption from taxation of a portion

of income related to exports of foreign sales corporations. The WTO found that the U.S. measures were

prohibited export subsidies. The United States has until October 1, 2000, to bring its laws into

conformity with its WTO obligations. The United States has not fully determined how it will comply with

the WTO ruling. The commercial stakes of this dispute are potentially large. The foreign sales

corporation tax provisions allow corporations a 15-percent to 30-percent tax exemption on exports used

abroad. The last Treasury report on the foreign sales corporations issued in 1997 on taxable year 1992

data shows $152.3 billion in exports benefited from the exemptions, with an estimated revenue cost of

the program of $1.3 billion and an estimated export gain due to the program of $1.5 billion.

41 U.S. imports of

Canadian cattle,

swine, and grain

This dispute involved U.S. state-level actions that restricted access to the U.S. market of some

Canadian trucks containing cattle, swine, and grain. The dispute was resolved through an agreement

that suspends the actions but also seeks to improve market access into the Canadian market for

animals and grains. The direct effect of the U.S. restrictions was limited, but the resulting agreement

may improve access to the Canadian market. The United States imported over $1.4 billion from Canada

and exported over $300 million to Canada of live cattle, swine, and grain in 1999.

42 Provisions of the

U.S. Trade Act of

1974

This dispute involved an EU challenge to the WTO consistency of U.S. section 301 trade law and

related provisions. The case was important to the United States commercially since section 301 is used

to address a wide variety of foreign trade practices with potentially large commercial values. However,

USTR noted that since this dispute did not involve a particular application of section 301, had the

United States lost the case and had chosen not to comply, the EU might not be able to show any actual

commercial damages to retaliate against. The United States brought a total of 119 section 301 cases

from 1975 through August 1999. On average this amounted to about five cases per year, both before

and after the formation of the WTO.

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number Case name Commercial significance
Appendix II

Commercial Significance of 42 U.S. WTO

Dispute Settlement Cases

Page 106 GAO/NSIAD-00-210 International Trade

a

Mercosur, the Common Market of the South, was created in 1991 by Argentina, Brazil, Paraguay, and

Uruguay.

Source: GAO analysis.
Page 107 GAO/NSIAD-00-210 International Trade

Appendix III

Objectives, Scope, and Methodology ApendxiI

The Chairman of the House Ways and Means Committee requested that we

review the WTO's dispute settlement system, focusing on WTO member

countries' use of the system over the past 5 years. In conducting the work,

we examined (1) the outcome and commercial impact of completed cases

involving the United States and (2) the major issues that have emerged in

using the system.

To evaluate the outcome and impact of cases involving the United States,

we examined 42 cases involving the United States that the Office of the U.S.

Trade Representative identified as completed as of March 16, 2000.

Completed cases included those that had gone through WTO litigation with

a panel and/or Appellate Body ruling and cases that were resolved without

a WTO ruling. Our analysis included subsequent actions taken on these

cases as of early July 2000.

To determine the impact of the cases on U.S. laws and regulations, and on

foreign practices, we identified those cases whose outcome resulted in a

change in laws, regulations, or guidelines or any change in administrative

procedures. We reviewed WTO dispute settlement documents including

requests for consultations, panel and Appellate Body decisions, and other

documents recording how the resolution of the cases was to be

implemented. We also reviewed U.S. Federal Register notices where

appropriate, as well as pertinent U.S. laws and regulations. We interviewed

senior officials from the Office of the U.S. Trade Representative, including

the Assistant U.S. Trade Representative for Monitoring and Enforcement,

on the major issues and outcomes of all 42 cases. Regarding particular

cases, we also met with senior officials from the Departments of

Agriculture, Commerce, State, and the Treasury, as well as the

Environmental Protection Agency. We also spoke with industry

representatives, interest groups, trade attorneys, and academics

knowledgeable about WTO cases. To determine whether the cases resulted

in significant changes in U.S. laws and regulations, we primarily considered

the nature of the change—whether substantive or procedural—and the

degree to which the change impacted U.S. programs or U.S. trade. Our

assessment was based on our own analysis as well as that of the affected

U.S. agency and relevant interest groups and industry associations. To

determine the changes in foreign practices, we relied on WTO and foreign

government documents, as well as interviews with U.S. government

officials from the agencies previously listed. We did not conduct an

independent analysis of the foreign changes or confirm those changes with

the individual foreign governments.
Appendix III

Objectives, Scope, and Methodology

Page 108 GAO/NSIAD-00-210 International Trade

To evaluate the commercial effects of the 42 cases, we examined the

available evidence for each case concerning the U.S. commercial interests

involved and the commercial consequences for the United States of the

case's resolution. However, we did not formally assess the economic

impact on the United States of each dispute's outcome. To present

indicators of the commercial interests involved in the disputes, we

gathered information on the market size, the level of investment, and the

level of trade in the cases. In categorizing cases as having potentially high

commercial stakes, we examined whether the case involved a high share of

a particularly large market, large duties or sanctions, or wider implications

for U.S. trade and trade policy. We also examined the trade barriers

involved and the extent to which they were or might be removed. In cases

involving intellectual property protection, we evaluated whether such

protection had increased as a result of the case. In addition, we examined

changes in trade flows of particular products after the resolution of a case.

To evaluate the commercial consequences of the cases, we also

interviewed senior government officials and industry experts with the

Office of the U.S. Trade Representative; the Departments of Agriculture,

Commerce, Energy, State, and the Treasury; as well as officials from the

U.S. International Trade Commission, the Patent and Trademark Office,

and the National Marine Fisheries Service. We used trade, market, and

other data from the Departments of Commerce, Energy, Agriculture, and

the Treasury, as well as the U.S. International Trade Commission, and the

National Marine Fisheries Service. When available, we examined

government and industry group estimates of the economic impact of the

cases; however, we did not verify their results.

To examine the major issues that have emerged during the first 5 years of

the WTO dispute settlement system, we reviewed U.S. government reports

and documents; legal texts and journals, and conference proceedings; and

other papers on WTO dispute settlement. In addition, we interviewed

senior U.S. government officials at the Departments of State, the

Environmental Protection Agency, the U.S. Department of the Treasury,

and the Office of the U.S. Trade Representative; representatives from the

President's Advisory Committee on Trade Policy and Negotiations; law

professors; lawyers in private practice; and representatives of several

nongovernmental organizations in the consumer, health, and

environmental protection fields. The focus of our inquiry was on

identifying major concerns in the areas of sovereignty, compliance,

timeliness, and transparency as well as on obtaining views on whether any

of the 42 specific cases involving the United States we examined confirmed
Appendix III

Objectives, Scope, and Methodology

Page 109 GAO/NSIAD-00-210 International Trade

or allayed these concerns. Regarding sovereignty, the specific issue we

addressed was the extent to which U.S. participation in the WTO dispute

settlement system affects the U.S. government's actions in the health,

safety, or environmental areas or with respect to unfairly traded imports.

We conducted our work from March through July 2000 in accordance with

generally accepted government auditing standards.
Page 110 GAO/NSIAD-00-210 International Trade

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Kim Frankena (202) 512-8124

Acknowledgments In addition to the person named above, Anthony Moran, Shirley Brothwell,

Howard Cott, Juan Gobel, Mary Moutsos, Nina Pfeiffer, Richard Seldin,

Elizabeth Sirois, Tim Wedding, and Katherine Woodward made key

contributions to this report.
Page 111 GAO/NSIAD-00-210 International Trade
Page 112 GAO/NSIAD-00-210 International Trade

Glossary

Ad Valorem Ad valorem is any charge, tax, or duty that is applied as a percentage of

value.

Antidumping Measures Antidumping measures include a duty or fee imposed to neutralize the

injurious effect of unfair pricing practices known as “dumping.”

Applied Tariff Rate Applied tariff rates are the actual tariff rates WTO member countries

currently apply to imports.

Balance-of-Payment

Provisions

Balance-of-payment provisions allow a WTO member to temporarily

impose price or quantity restrictions on imports when facing a serious

decline or low level of its monetary reserves in order to increase its foreign

currency holdings.

Bound Tariff Rate Bound tariff rates are most-favored-nation tariff rates resulting from GATT

negotiations and thereafter incorporated as integral provisions of a

country's schedule of concessions. The bound rate may represent either a

reduced tariff rate or a commitment not to raise the existing rate.

Copyright A copyright is an intellectual property right in an original work of

authorship that arises automatically upon creation of such a work and

belongs, in the first instance, to the author.

Countervailing Duty A countervailing duty is a special duty an importing country imposes to

offset the economic effect of a subsidy and thus prevent injury to a

domestic industry caused by a subsidized import.

De Minimis Dumping or

Subsidy Level

De minimis dumping is the level below which a dumping margin or subsidy

is considered to be negligible. Antidumping or countervailing duty actions

are terminated in cases where the margin of dumping or level of subsidy is

below the de minimis level.
Glossary

Page 113 GAO/NSIAD-00-210 International Trade

Dumping Dumping is the sale of a commodity in a foreign market at a lower price

than its fair market value. Dumping is generally recognized as unfair

because the practice can disrupt markets and injure producers of

competitive products in an importing country.

Duty A duty is a tax imposed on imports by the customs authority of a country.

Duties are generally based on the value of the goods (ad valorem duties),

other factors such as weight or quantity (specific duties), or a combination

of value and other factors (compound duties).

Export Subsidy An export subsidy is generally a subsidy that is provided on the basis of

export performance.

Foreign Sales Corporation The Foreign Sales Corporation provisions of the U.S. Internal Revenue

Code provide an income tax benefit for exporting, permitting firms to

exempt between 15 percent and 30 percent of export income from taxation.

General Agreement on

Tariffs and Trade

The General Agreement on Tariffs and Trade was created in 1947 as an

interim measure pending the establishment of the International Trade

Organization, which never came into being. Operating in the absence of an

explicit international organization, GATT provided the legal framework for

international trade, with its primary mission being the reduction of trade

barriers, until the advent of the WTO in 1995.

Intellectual Property Rights Patents, trademarks, and copyrights are the three primary forms of

intellectual property rights in worldwide use. They encourage the

introduction of innovative products and creative works to the public by

guaranteeing their originators a limited exclusive right, usually for a

specified period of time, to whatever economic reward the market may

provide for their creations.

Local Content Requirements Local content requirements are the most common form of trade-related

investment measures. They oblige an investor to purchase or use a specific

amount of inputs from local suppliers. Local content requirements are used
Glossary

Page 114 GAO/NSIAD-00-210 International Trade

in an attempt to ensure that the investment increases local employment

and develops physical and human capital.

Most-Favored-Nation

Treatment

Most-favored-nation treatment is a principle of nondiscrimination that

commits all WTO signatories to extend the same treatment to all other

signatories.

National Treatment National treatment is the act of treating a foreign product or supplier no

less favorably than domestic products or suppliers.

Nontariff Trade Barriers Most nontariff trade barriers are measures used at the border to restrict the

inflow of foreign goods. Major categories of nontariff barriers include

quantitative import restrictions such as quotas, voluntary export restraints,

and price controls.

Patent A patent protects an invention by giving the inventor the right to exclude

others from making, using, or selling a new, useful, nonobvious invention

during a specific period of time.

Rules of Origin Rules of origin are the criteria used to define where a product was made.

They are an essential part of trade rules because several policies of an

importing country, including quotas, preferential tariffs, antidumping

actions, and countervailing duties, vary depending on the exporting

country.

Safeguard A safeguard is a temporary import control or other trade restriction that a

country imposes to prevent injury to a domestic industry from import

surges. It is designed to facilitate the adjustment of domestic industries to

the influx of fairly traded imports.

Sanitary and Phytosanitary

Measures

Sanitary and phytosanitary regulations are measures taken to protect

human, animal, or plant life or health. WTO rules require these measures to

be based on scientific principles and not act as disguised trade restrictions.
Glossary

Page 115 GAO/NSIAD-00-210 International Trade

Section 301 of the 1974

Trade Act

Section 301 is a U.S. law providing the United States with the domestic

vehicle for pursuing redress against foreign policies or practices that

burden or restrict U.S. commerce.

Services Services consist of economic activities whose outputs are other than

tangible goods, including businesses such as accounting, advertising,

banking, engineering, insurance, management consulting, retail, tourism,

transportation, and wholesale trade.

Subsidy A subsidy is generally considered to be a bounty or a grant provided by a

government that confers a financial benefit on the production,

manufacture, or distribution of goods or services. Government subsidies

include direct cash grants, concessionary loans, loan guarantees, and tax

credits.

Tariff A tariff is a tax imposed on imported goods, sometimes used to raise

revenues or protect domestic industries from foreign competition.

Tariff-rate Quota System A tariff-rate quota is the application of a lower tariff rate for a specified

quantity of imported goods. Imports above this specified quantity face a

higher tariff rate.

Technical Barriers to Trade WTO members have the right to adopt the regulations, standards, testing,

and certification procedures they consider appropriate — for example, for

human, animal, or plant life or health, for the protection of the

environment, or to meet other consumer interests. The WTO Agreement on

Technical Barriers to Trade is intended to ensure that such measures do not

create unnecessary obstacles to trade and to encourage countries to use

international standards.

Trade-balancing

Requirements

Trade-balancing requirements allow an investor to import goods only up to

a specified amount, which is determined by the investor's locally produced

exports. Governments use such requirements to maintain or achieve a

favorable balance of trade.
Glossary

Page 116 GAO/NSIAD-00-210 International Trade

Trade-related Investment

Measures

Trade-related investment measures require specific behavior from

investors that affects trade. Trade-related investment measures are placed

on foreign direct investment (that is, investment in factories or businesses)

by governments in an effort to influence investment decisions such as the

sourcing of goods, the location of production, and the sites for markets;

and to increase the likelihood that the host nation will capture the benefits

expected from the investment. Trade-related investment measures can be

either mandatory or can take the form of an incentive for an investor.

Unfair Trade Practices Unfair trade practices include the dumping of an exported product below

the price charged for the same good in the “home” market of the exporter,

or the subsidizing of a product by a government.

Uruguay Round The Uruguay Round resulted in an agreement establishing the World Trade

Organization. The Uruguay Round was the eighth and final round of

multilateral trade negotiations held under the auspices of the GATT. These

negotiations were initiated in Uruguay in September 1986 and concluded in

April 1994.

World Trade Organization The WTO, which was established on January 1, 1995, as a result of the

Uruguay Round agreements, administers rules for international trade and

provides a forum for resolving trade disputes and conducting trade

negotiations. The WTO provides the institutional framework for the

multilateral trading system.

(711536) Letr
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