Bad Lawyering or Ulterior Motive? Why the United States Lost the Film Case before the WTO Dispute Settlement Panel (1999)

I. INTRODUCTION In order to convince countries such as United States to forgo unilateral response measures to violations of General Agreement on Tariffs and Trade (GATT),(1) World Trade Organization (WTO) Dispute Settlement Understanding (DSU) arose out of Uruguay Round of GATT Negotiations in 1994,(2) as an efficient dispute settlement mechanism. Since its inception, Dispute Settlement Body(3) has received 163 consultation requests on 125 different matters.(4) The United States has invoked WTO DSU in 34 cases to date as plaintiff, 7 of which have continued beyond consultation phase.(5) On January 30, 1998, DSU panel, formed in October 1996 to hear case brought by United States against Japan and its photographic film market,(6) announced its final decision that United States had lost.(7) This Note will attempt to analyze why. Did this infallible dispute settlement mechanism fail, or did United States simply not have a case? Did United States lose case but still get what it wanted? This Note will also look at consequences of this decision on international trade and examine alternative courses of that United States could have taken, has taken, and will probably take in future. II. BACKGROUND A. The Route to WTO 1. Eastman Kodak Complained On May 18, 1995, Eastman Kodak Company (Kodak) filed a petition for relief from Japanese market barriers in consumer photographic film and consumer photographic paper with U.S. Trade Representative (USTR) under section 301 of Trade Act of 1974.(8) Kodak's petition alleged that anticompetitive practices of Fuji Photo Film (Fuji) amounted to unfair trade practices under Japanese Antimonopoly Act.(9) Kodak argued that Japanese government's tolerance of those practices had deprived it of $5.6 billion in cumulative forgone revenues in Japan since 1975 and created a protected profit sanctuary in Japan for Fuji.(10) Kodak argued that this affected global competitive balance between Kodak and Fuji and fostered dumping in world markets, including U.S. market.(11) 2. Section 301 Determination Section 301 authorizes USTR to take all appropriate and feasible action in order to obtain the elimination of act, policy or practice that he or she determines is or discriminatory and burdens or restricts United States commerce.(12) U.S. companies have been fighting trade barriers to Japanese market for some time, citing such key barriers as Japanese regulatory technique of administrative guidance, keiretsu, and complex distribution systems.(13) These restrictive practices were made focal point of section 301 petition. The petition submitted that all four of Japan's major photographic supply wholesalers have exclusive supply contracts with Fuji.(14) A market survey conducted by Kodak's legal team found that Kodak is wholly absent from two-thirds of stores in Japan, unable to get its products on shelves. The survey also found that Kodak only has a 9.8% market share in Japan, its lowest share in any major market in world.(15) On June 13, 1996, following a one-year investigation, USTR made its section 301 determination; that certain acts, policies, and practices of government of Japan with respect to sale and distribution of consumer photographic materials in Japan [were] unreasonable and burden or restrict U.S. commerce.(16) Specifically, USTR mentioned Japan's toleration of a market structure that impedes U.S. exports, as well as certain Japanese government liberalization counter-measures that it believes contravened Japan's obligations under GATT and nullified or impaired benefits accruing to United States under this agreement.(17) 3. United States Requests WTO Panel Pursuant to DSU procedures, USTR requested a consultation with Japan. …