World Trade Organization: Standard of Review and Impact of Trade Remedy Rulings
Released: 2003-07-30T00:00:00

Letter

Background

The 1994 Uruguay Round agreements created the WTO dispute settlement system. The new system replaced the one under the General Agreement on Tariffs and Trade (GATT), the predecessor to the WTO. The Uruguay Round created a stronger dispute settlement system that, unlike the system under the GATT, discourages stalemates by not allowing parties to block decisions. In addition, the new system established a standing Appellate Body, with the aim of making decisions more stable and predictable.

The WTO dispute settlement system operates in four major phases: consultation, panel review, Appellate Body review (when a party appeals the panel ruling), and implementation of the ruling. To initiate, or file, a dispute, a WTO member requests consultations with the defending member. If the parties do not settle the case during consultations, the complainant may then request that a panel be established. Nonpermanent, three-person panels issue formal decisions, or reports, for cases that are appealed; three members of a permanent, seven-member Appellate Body— comprised of individuals with recognized standing in the field of law and international trade—review panel findings. The Dispute Settlement Body, which is comprised of representatives of all WTO members, approves all final reports, and only a consensus of the members can block decisions. Thus, no individual member can block a decision.

When a WTO member challenges a trade remedy measure, the panels and the Appellate Body apply standards of review, outlined in certain WTO agreements, to evaluate members’ factual and legal determinations supporting these measures. In the United States, the Department of Commerce and the International Trade Commission (ITC) investigate whether the United States should impose antidumping or countervailing duties to offset unfair foreign trade practices. The ITC also investigates whether the conditions exist for the United States to invoke safeguards in response to import surges.

Trade Remedy Cases Increased Over Time, but Few Measures Were Challenged

From 1995 through 2002, WTO members brought 198 formal dispute settlement cases against other members. One-third (64 cases) involved members’ trade remedies, and the ratio of trade remedy cases filed, versus all other types, generally increased over the time period. Among WTO members, the United States has been by far the most frequent defendant in trade remedy cases but relatively less active in filing complaints. Overall, however, WTO members have challenged a relatively small share of the trade measures that their fellow members imposed, although the proportion of U.S. trade measures challenged was larger.

About One-third of All Cases Involved Trade Remedies, and Ratio Increased Over Time

Overall, about one-third (64) of all WTO cases involved members’ trade remedies. From 1995 to 2000, an increasing proportion of the cases filed pertained to trade remedy measures and laws, as shown in figure 1. In 2001 and 2002, there was somewhat of a shift in this trend.

United States Has Been the Most Frequent Defendant, but Less Active as a Complainant

In comparing WTO members’ participation in the trade remedy cases, the United States by far has been the most frequent defendant but less active as a complainant. As shown in figure 2, the United States was a defendant in 30 (47 percent) of the 64 trade remedy cases, a majority of which were filed since January 2000. The next most frequent defendants were Argentina, which defended 6 cases, and the EU, a defendant in 5 cases. On the other hand, the United States was less active than other WTO members in filing trade remedy cases. As figure 2 also shows, the EU was the most frequent complainant in the 64 trade remedy cases, filing 16 complaints. Six WTO members each filed more complaints than the United States.

U.S. agency officials said that it was not surprising that the United States had been a defendant more often than a complainant in WTO disputes since (1) the United States has the world’s biggest economy and most desirable market and (2) U.S. laws and procedures are more detailed and transparent than those of other members that are large users of trade remedies. These officials also pointed to the easy availability in the United States of trade lawyers, who could assist in bringing trade remedy actions, as another factor.

Few Imposed Measures Were Challenged, but U.S. Measures Were Challenged Most

Although members notified the WTO that they imposed 1,405 trade remedy measures from 1995 through 2002, only a small percentage of these measures were challenged in the dispute settlement system. Specifically, WTO members challenged only 63 (4 percent) of the 1,405 measures, but nearly one-half of these challenges involved U.S. trade measures. Over the same period, as shown in figure 3, the United States imposed the most trade remedy measures (239) and had the biggest number and share (29, or 12 percent) of its measures challenged by other WTO members. On the other hand, India, the next biggest user of trade remedy measures, had none of its 226 measures challenged. WTO members challenged 4 (2 percent) of the EU’s 182 trade remedy measures and 7 (6 percent) of Argentina’s 127 trade remedy measures.

Domestic Determinations Generally Were Rejected, but Statutes Were Upheld

While the 25 WTO trade remedy rulings completed from 1995 through 2002 generally rejected domestic agency determinations supporting trade measures, the rulings upheld a vast majority of the trade remedy laws that were challenged. The WTO rejected at least half of the domestic agency determinations in most of the 21 cases dealing with such determinations. The WTO also rejected roughly the same proportion of U.S. and non-U.S. domestic determinations. The 21 rulings addressed issues ranging from whether domestic agencies adequately justified imposing a trade remedy measure to whether WTO members followed proper procedures in initiating the disputes. Regarding WTO rulings on members’ laws, only U.S. laws were challenged during the period. The WTO upheld more than three- quarters of the U.S. laws challenged in 9 cases involving 13 challenges.

WTO Rejected Majority of Domestic Determinations; U.S./Non-U.S. Rejection Ratios Were Similar

The WTO made findings on a total of 175 domestic agency determinations in 21 of the 25 trade remedy cases completed through 2002. As shown in figure 4, in 17 of the 21 cases the panels rejected 50 percent or more of the domestic agency’s determinations—rejecting all determinations in 5 cases. In all 21 cases, the WTO found at least one aspect of a measure to be inconsistent with WTO requirements.

When comparing rulings among WTO members on domestic determinations, the United States and other WTO members fared similarly. Overall, as shown in figure 5, the WTO rejected almost the same proportion of the U.S.’s and other WTO members’ domestic determinations—57 percent and 56 percent, respectively.

All WTO Challenges to Trade Remedy Laws Involved U.S. Laws, but Most Laws Were Upheld

Although to date WTO members have challenged only U.S. laws, the WTO upheld a large majority of these laws. As shown in table 1, in the 13 instances (in 9 cases), in which WTO members directly challenged U.S. laws, the WTO upheld U.S. laws in 11 challenges and rejected U.S. laws in 2 challenges.

Addressing why only U.S. trade remedy laws were challenged, a U.S. agency official said that U.S. laws tend to be more vulnerable because they are more detailed than those of other members, and their language is not the same as the language in the WTO agreements. In contrast, according to the official, some WTO members essentially take the language in the relevant WTO agreement and make it their law.

Rulings Resulted in Few Changes to Members’ Laws, Regulations, and Practices but Caused Numerous Changes to U.S. Measures

The 25 WTO trade remedy rulings completed from 1995 through 2002 did not result in many changes to WTO members’ laws, regulations, or practices. However, the rulings more often resulted in the onetime revision to, or removal of, trade remedy measures. The rulings affected a number of U.S. laws, regulations, practices, and measures; but for other WTO members, no laws or regulations were affected, and only one practice was subject to change. Furthermore, fewer foreign trade measures were subject to removal or revision. Nonetheless, U.S. officials told us that the rulings to date had not significantly impaired their ability to impose trade remedies. However, they told us they were concerned about the potential for rulings to have a greater adverse impact in the future. In addition, U.S. agencies said that, with few exceptions, the rulings did not question U.S. methodologies for determining whether to impose remedies but have required them to provide fuller explanations and justifications for their decisions.

Rulings Caused Few Changes to Members’ Laws, Regulations, or Practices

WTO rulings resulted in a small number of changes to members’ laws, regulations, and practices, with all but one of those changes involving U.S. trade remedies. In the 14 completed trade remedy cases in which the United States was the defendant, two U.S. laws, one regulation, and three practices were changed or are subject to change, as shown in table 2. In the 11 cases involving other WTO members, only one practice was subject to change.

Specifically, the two U.S. laws subject to change are a section of the Antidumping Act of 1916 and a section of the Tariff Act of 1930 involving calculation of the “all others” rate. In the 1916 Antidumping Act case, the WTO found the U.S. law to be in violation of GATT 1994 and the WTO Antidumping Agreement because it authorized imposing fines, imprisonment, and recovery of damages in response to the dumping of products in the U.S. market—remedies that are not provided for in those agreements. Both the U.S. Senate and the House of Representatives have introduced legislation to repeal the 1916 Act. The proposed change to the Tariff Act of 1930 involves making calculation of the “all others” rate consistent with the WTO Antidumping Agreement. The WTO granted the United States until the end of December 2003 to comply, but so far Congress has not addressed this change.

The one change to a U.S. regulation stemmed from a case involving U.S. antidumping duties imposed on imports of Korean dynamic random access memory semiconductors (DRAMS). To implement the ruling, the United States replaced its regulatory standard for revoking an antidumping order—that dumping was “not likely” to occur—with the standard in the WTO Antidumping Agreement—that “continued imposition of the antidumping duty is necessary to offset dumping.”

The three changes to U.S. practices involved a revision of the “arm’s- length” methodology in antidumping cases and two privatization methodologies that the Commerce Department used in countervailing duty cases to calculate the extent to which the benefit of past subsidies are passed on to private purchasers of state-owned enterprises. The United States revised its “arms-length” methodology to conform to the WTO Antidumping Agreement by expanding the scope of sales to an affiliated business that could be considered to be made in the ordinary course of trade. Commerce revised its countervailing duty methodology to conform to the Appellate Body’s first privatization decision, but the Appellate Body later ruled that the revised methodology was also inconsistent with the Subsidies and Countervailing Measures Agreement. Commerce revised its methodology a second time to reflect the Appellate Body’s finding that an arm’s-length, fair market value sale of a subsidized, state-owned entity to a private buyer creates a presumption that the privatized entity no longer benefits from past subsidies.

Aside from the changes to U.S. laws, regulations, and practices, 1 case resulted in a change to an EU practice. In that case, the WTO ruled that the EU’s practice of “zeroing” was not permitted under the WTO Antidumping Agreement. Zeroing in that case concerned the EU’s changing negative dumping margins to zero when comparing dumping margins of different models of like products—for example, comparing dumping margins of high-end satin sheets with low-end polyester/cotton blend sheets.

Rulings Brought about Increased Removals and Revisions of Specific Trade Measures

In contrast to the relatively few changes in members’ laws, regulations, and practices, most of the rulings in the 25 completed trade remedy cases involved a case-specific removal or revision of a WTO member’s trade remedy measure. More U.S. measures were affected than those of all other members. In the 14 completed cases brought against the United States, 21 U.S. trade measures were subject to revision or removal, while the 11 completed cases against other countries resulted in 7 trade measures being subject to revision or removal, as shown in table 2.

Specifically, the United States reduced antidumping margins on measures in response to 3 WTO rulings, removed countervailing duty measures in 1 case as a result of domestic litigation, and is revising countervailing duty measures in 2 other cases. And in 3 cases, the United States removed, or allowed to expire, safeguard measures that the Appellate Body found inconsistent with the WTO Safeguards Agreement.

By contrast, other WTO members removed antidumping measures in 3 cases and are due to remove or revise antidumping measures in 2 cases.

In addition, other members removed safeguard measures as a result of 2 WTO rulings.

U.S. Officials Are Concerned about the Potential Impact of WTO Rulings on U.S. Ability to Impose Trade Remedy Measures

While U.S. officials told us that WTO trade remedy rulings had not yet significantly impaired the U.S.’s fundamental right and ability to use its trade remedies, they are concerned about the rulings’ potential to do so in the future. For example, Commerce Department officials said that implementing the second Appellate Body ruling on privatization may have a substantial impact on similar proceedings in the future as well as existing countervailing duty orders.

In addition, U.S. officials expressed concern about the potential negative ramifications of the WTO ruling in the EU bed linen case. First, U.S. officials said that although the United States did not change its “zeroing” practice as a result of the ruling against the EU, they noted that the ruling could affect a current Canadian dispute against the United States involving U.S. zeroing practices. Furthermore, the EU has recently challenged 21 Commerce Department antidumping determinations with regard to the U.S.’ zeroing practice. The EU alleged that U.S. application of its zeroing practice is inconsistent with the WTO Antidumping Agreement and GATT 1994. The EU also asserted that U.S. laws and regulations providing for this zeroing practice appear to be inconsistent with those agreements. As shown by this challenge, U.S. officials believe that when the WTO strikes down a practice, there is significant potential for WTO members to challenge similar practices of other members. Accordingly, these officials said they are monitoring WTO rulings and recommendations in cases not involving the United States in order to prepare for similar, potential challenges against the United States.

In the safeguards area, U.S. officials indicated that some WTO rulings were confusing and extremely difficult to implement, particularly regarding certain aspects of causation—the extent to which increases in imports cause serious injury, or threaten serious injury, to domestic industry. U.S. officials also said that they have had to increase the level of detail they provide in explaining their analyses and how they apply their methodologies in safeguard investigations. For example, they cited safeguard rulings dealing with “nonattribution,” an aspect of causation requiring that injury to domestic industry caused by factors other than increased imports not be attributed to increased imports. U.S. officials said that these rulings could be viewed as calling for domestic agencies to quantify the amount of injury due to increased imports versus the amount due to other factors—a task they consider to be difficult, if not impossible. Moreover, the officials said they would now have to expend more resources in conducting safeguard investigations.

Two Standards of Review Apply to WTO Trade Remedy Cases

WTO panels use two standards of review in evaluating the factual and legal determinations of WTO members’ domestic agencies in trade remedy cases. Article 11 of the WTO Dispute Settlement Understanding applies to all cases brought under the WTO dispute settlement system and calls for an objective assessment of domestic agency determinations. The Appellate Body has stated that in applying article 11, panels should not conduct a new review of domestic agency fact-finding nor totally defer to domestic agency determinations. Article 17.6 of the Antidumping Agreement applies only to antidumping cases and is more specific and deferential than article 11. Appellate body guidance on article 17.6 calls for panels first to apply established international rules of treaty interpretation to interpreting provisions of the Antidumping Agreement before deciding whether to uphold a domestic agency’s interpretation. In the relatively few number of instances in which the Appellate Body has considered standard of review issues, it has found that panels have generally interpreted and applied both standards of review correctly. Finally, panel and Appellate Body decisions generally discuss the standards of review, but the extent of the discussion varies by trade remedy area, case, and issue.

WTO Has Two Principal Standards of Review

The standard of review that WTO panels and the Appellate Body apply in WTO dispute settlement cases refers to how they evaluate and defer to the factual and legal determinations of domestic agencies of WTO members. The two principal standards of review that WTO panels and the Appellate Body use to evaluate these determinations are article 11 of the WTO Dispute Settlement Understanding and article 17.6 of the WTO Antidumping Agreement. Article 11 applies to cases brought under all the WTO agreements that are covered by the dispute settlement system and supplements article 17.6 in antidumping cases. Article 17.6 only applies to cases brought under the Antidumping Agreement, which is the only WTO agreement that has a specific standard of review.

Article 11 Calls for an Objective Assessment

Article 11 obligates a panel to make an “objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant” WTO agreement. The Appellate Body has interpreted this requirement to mean that panels should neither conduct a new review of domestic agency fact-findings, often referred to as a “de novo review,” nor totally defer to domestic agency determinations. In rejecting both these extremes, the Appellate Body has found that the panels are poorly suited to engage in new reviews and cannot ensure an objective assessment by totally deferring to domestic agency determinations. What the panels should do in safeguards cases, according to the Appellate Body, is ascertain whether domestic agencies have evaluated all relevant facts and provided an adequate, reasoned, and reasonable explanation about how the facts supported their determinations.

Article17.6 Is More Specific and Deferential than Article 11

Article 17.6 is more specific than article 11 and calls for more deference to domestic agency determinations. Article 17.6 is divided into two subparts— factual and legal—and establishes standards of review for panel evaluations of domestic agency determinations. Under the factual standard of review in article 17.6(i), panels must determine whether domestic agencies have properly established the facts and evaluated them in an unbiased and objective manner. When a panel finds that the domestic agency has performed this task, the panel cannot overturn the domestic agency’s determination even if it might have reached a different conclusion. The Appellate Body has stated that the panel’s obligation under the factual standard in article 17.6(i) closely reflects the obligation imposed on panels under article 11.

Under the legal standard of review in article 17.6(ii), panels must apply established international rules in interpreting provisions of the WTO Antidumping Agreement. These rules are set forth in articles 31 and 32 of the Vienna Convention on the Law of Treaties and provide a method for interpreting provisions of the Antidumping Agreement. When a panel applies these rules and finds that there is more than one permissible way to interpret a provision of the Antidumping Agreement, the panel must uphold the domestic agency’s determination if it is consistent with one of the permissible interpretations. The Appellate Body’s guidance to panels about how they are to apply this standard is consistent with the sequence implied above. Thus, panels should first use the international rules to interpret the WTO provision in question, and only after completing this task should panels then decide whether to uphold the domestic agency’s legal determination. The Appellate Body has stated that application of the international rules could give rise to at least two permissible interpretations of some provisions of the Antidumping Agreement.

Appellate Body Generally Upheld Panels’ Treatment of Standards, but Treatment Was Seldom Challenged

WTO members did not often challenge panel interpretations and applications of the standards of review, and most challenges involved article 11. In most instances, the Appellate Body upheld the panels’ treatment of the standards. In the 14 instances in which the Appellate Body specifically ruled on panel interpretations and applications of standard of review, it found that the panels had correctly addressed the standards in 11 instances—9 involving article 11 and 2 involving article 17.6.

Panels/Appellate Body Discuss Standard of Review in Cases, but Extent Varied

As indicated above, panels have the responsibility for applying the standards of review in articles 11 and 17.6 when evaluating determinations of WTO member domestic agencies. The Appellate Body’s function is to review how panels have interpreted and applied these standards and to uphold, modify, or reverse panel actions. For the most part, Appellate Body decisions in trade remedy cases have included longer and more detailed discussions of standard of review than the panels.

Aside from differences between the panels and the Appellate Body, the extent to which standards of review are discussed vary by trade remedy area, case, and issue. Thus, standards of review are discussed, at least to some extent, in all safeguard and antidumping cases involving determinations of domestic agencies but are not mentioned in a number of countervailing duty cases. In many of the safeguard and antidumping cases, the panels discuss article 11 or article 17.6, respectively, at the beginning of the case, indicating that they are the standards of review to be applied in evaluating the domestic agency determinations involved, though the amount of introductory discussion varies from case to case. The standards of review are sometimes also discussed, or alluded to, later in panel and Appellate Body reports in connection with evaluations of particular domestic agency determinations. These allusions to the standards of review involve use of language from the standards themselves or interpretations of the standards rather than any specific mention of them. For example, in the safeguard cases, panels often invoke Appellate Body guidance about what kind of domestic agency explanation is necessary— an “adequate, reasoned, and reasonable explanation”—without mentioning article 11. Similarly, in antidumping cases, panels sometimes refer to the requirement in article 17.6(i) to conduct an “unbiased and objective” evaluation of domestic agency fact-finding without specifically mentioning 17.6(i). Finally, for some issues, panels neither specifically mention nor allude to standard of review provisions.

Expert Views and U.S. Agency Positions on Standard of Review and Other Trade Remedy Issues

How the WTO has interpreted and applied the standard of review in trade remedy cases and how it has resolved important trade remedy issues are highly controversial issues in the United States. Further, a number of these important trade remedy issues are highly complex, technical, and not easily explained, as evidenced by their lengthy treatment in WTO panel and Appellate Body reports. Accordingly, we decided to interview a wide range of WTO legal experts to obtain their views on these issues.

The most common concern identified by the experts with whom we spoke, although a minority view, was about how the WTO was applying article 17.6(ii) in antidumping cases. Notwithstanding this concern, overall a majority of the experts believed that the WTO had not exceeded its authority in applying the standard of review in the trade remedy cases we reviewed. Commenting on more general issues surrounding the WTO trade remedy rulings, almost all of the experts believed that the United States and other WTO members have received the same treatment in trade remedy cases. In addition, a majority of the experts who responded concluded that WTO decisions generally have not added to obligations or diminished rights of WTO members and that it was appropriate for the WTO to interpret vague and ambiguous provisions in WTO agreements, sometimes referred to as “gap filling.” However, a significant minority of experts strongly disagreed with this view about WTO members’ obligations and rights and considered gap filling to be inconsistent with several provisions of the Dispute Settlement Understanding. Regarding specific rulings, a number of experts cited some safeguard rulings as confusing and unclear.

In contrast to the majority views expressed above, the U.S. agencies most involved in trade remedy activities believed that article 17.6(ii) has been improperly applied in some trade remedy cases, mainly because the WTO has not applied article 17.6(ii) in a way that allows for upholding permissible interpretations of WTO members’ domestic agencies. They also believed that in certain trade remedy cases, the WTO has found obligations and imposed restrictions on WTO members that are not supported by the texts of the WTO trade remedy agreements.

Significant Minority Expressed Concerns about WTO Application of Article 17.6(ii)

A common concern raised by a significant minority of experts with whom we spoke was that the WTO was not properly applying the legal standard of review in article 17.6(ii) of the Antidumping Agreement. Specifically, these experts maintained that Appellate Body guidance calling for panels to first apply international rules in the Vienna Convention on the Law of Treaties to interpret provisions of the Antidumping Agreement before they evaluate the domestic agencies’ legal determinations necessarily leads to only one interpretation. Consequently, panels never reach the point of applying the part of article 17.6(ii) that allows for multiple permissible interpretations and upholding an agency determination that is based on one of these interpretations. In fact, while several experts mentioned specific rulings in which panels or the Appellate Body had upheld domestic agency determinations as permissible, it was unclear whether this was due to these bodies going through the article 17.6(ii) analysis or solely because they agreed with the domestic agency. In this regard, in the trade remedy cases we reviewed, no expert pointed to a clear instance in which a panel first applied the Vienna Convention, found several permissible interpretations, and then upheld the agency determination because it was consistent with one of them. One expert, who was a former U.S. negotiator in the Uruguay Round, stated that U.S. negotiators in the round had not fully appreciated how application of the Vienna Convention would limit the possibility of panels or the Appellate Body finding multiple permissible interpretations of the Antidumping Agreement.

Some experts also believed that panels and the Appellate Body have not applied the legal standard of review in article 17.6(ii) in the deferential way intended by the United States, as expressed in the U.S. Statement of Administrative Action (SAA) accompanying the U.S. Uruguay Round Agreements Act. The SAA describes article 17.6 as a special standard of review analogous to the deferential standard applied by U.S. courts in reviewing actions by the Commerce Department and the ITC, commonly referred to as the Chevron standard. Thus, from the U.S. perspective, article 17.6 was intended to ensure that WTO panels neither second-guess the factual conclusions of domestic agencies, even when panels might have reached a different conclusion, nor rewrite, under the guise of legal interpretation, the provisions of the Antidumping Agreement.

Majority Said WTO Did Not Exceed Its Authority in Applying Standard of Review

Despite the concerns expressed above, the majority of the experts with whom we spoke indicated that the panels and the Appellate Body generally had not exceeded their authority in applying the standards of review in articles 11 and 17.6 in the trade remedy cases we reviewed. These experts indicated that panels and the Appellate Body had properly applied article 11 in safeguards and countervailing duty cases as well as the factual standard of review in article 17.6(i) in antidumping cases. Several of this group even questioned whether article 11 was intended to be a standard of review provision at all and, if it was, that it did not intend the same level of deference as article 17.6. Majority support for how panels and the Appellate Body applied the legal standard in article 17.6(ii) included experts who thought the panels and the Appellate Body had generally applied the article correctly and provided the right amount of deference, those who believed the article was not particularly deferential, and those who considered the article to primarily set forth a method for interpreting provisions of the Antidumping Agreement rather than for conferring deference. Finally, a number of experts, including a few with divergent opinions about whether the legal standard in article 17.6(ii) had been properly applied, stated that evaluation of panel and Appellate Body decisions should focus on their substantive rulings and not the technical issue of standard of review.

A majority of experts also maintained that the United States was not successful in getting the standard of review it wanted in the Antidumping Agreement and that the SAA only expresses the U.S.’s view about the intent of article 17.6. They pointed out that while the United States was the main proponent for having a strongly deferential standard included in the Antidumping Agreement, numerous WTO members opposed the United States on this issue. Although the experts agreed that the lack of written negotiating history makes it difficult to determine how much deference article 17.6 was intended to provide, a large number believed that the language that was ultimately agreed to did not include the Chevron standard.

Large Majority Said All WTO Members Were Treated the Same in Trade Remedy Cases

Experts with markedly divergent views on other issues were in near unanimous agreement that the United States generally was being treated about the same as other WTO members in trade remedy cases. Although several experts pointed out that the United States was the most frequent defendant and was losing more often than other WTO members, they believed that the panels and the Appellate Body had ruled against other WTO members with the same frequency and in the same or similar manner as they had for the United States. Several experts also were emphatic in describing the WTO as a plaintiff’s court in trade remedy cases and pointed out that in nearly all trade remedy decisions and all the safeguards decisions we reviewed, respondents were asked to take some action—for example, to ensure that a safeguard measure was applied consistent with the Safeguards Agreement. When asked why respondents usually lose trade remedy cases, some experts cited a WTO free trade bias or bias against trade remedies as the principal reason. Several others said that WTO members only bring trade remedy actions in the WTO that they are confident they can win. As to why the United States was the most frequent defendant in trade remedy cases, several experts mentioned the fact that the United States was the biggest market as well as the biggest user of trade remedies. In addition, several experts believed that some of the Commerce Department’s decisions to impose trade remedy measures were unfounded.

Majority Said No New Obligations or Diminished Rights, but Minority Strongly Disagreed

A majority of experts who responded to this issue agreed that panels and the Appellate Body generally have not added to the obligations or diminished the rights of the United States and other WTO members in trade remedy cases. They believed panels and the Appellate Body generally had ruled appropriately in these cases, including the rulings on issues that the experts cited most frequently as being important and controversial— zeroing, facts available, nonattribution, unforeseen developments, and privatization. A number of these experts believed that the panels and the Appellate Body had both the authority and the need to interpret vague or ambiguous provisions, or to fill gaps, in the trade remedy agreements when no provision clearly deals with an issue. A number also cited article 3.2 of the Dispute Settlement Understanding, which calls for dispute settlement to “clarify the . . . provisions of the Agreements,” as support for panel and Appellate Body interpretations of vague or ambiguous provisions. Furthermore, a number stated that it is a common and accepted practice for courts to interpret vague or ambiguous provisions of laws and agreements, or to fill gaps, when the meaning of a legal provision is unclear.

A significant minority of experts, however, strongly believed that panel and Appellate Body findings on a number of important issues, including those listed above, had added to obligations or diminished the rights of the United States and other WTO members. For example, some in this group believed that panels or the Appellate Body should have upheld the domestic agency determinations on the antidumping issues of zeroing, facts available, and nonattribution as permissible under the legal standard of review in article 17.6(ii). In addition, they contended that gap filling was prohibited by articles 3.2 and 19.2 of the Dispute Settlement Understanding, both of which preclude the Dispute Settlement Body from adding to obligations or diminishing the rights of WTO members as provided in the WTO agreements covered by dispute settlement. Furthermore, they believed that the WTO had engaged in improper gap filling in its rulings regarding the aforementioned issues, including privatization. They said that WTO provisions on these issues were unclear and that privatization was not specifically referred to in the Subsidies and Countervailing Measures Agreement. Finally, some experts concluded that it was improper for the panels and the Appellate Body to rule on issues that the negotiating members had intentionally left unclear. They believed that the proper way to deal with vague and ambiguous language in the WTO agreements was through additional negotiations rather than through panel or Appellate Body rulings.

Experts Believed Some Safeguard Rulings Were Confusing and Unclear

A substantial number of experts stated that WTO rulings on the safeguard issues of causation and unforeseen developments were confusing and difficult to follow. This group included experts with sharply divergent views on other trade remedy issues. Specifically, these experts believed that the lack of clarity in the rulings on the causation issue of nonattribution has made it difficult for domestic agencies to implement the rulings. Some in this group were concerned that the rulings seemed to require a quantitative analysis of each factor causing serious injury to domestic industry to ensure the factors were not being improperly attributed to increased imports, and several questioned whether domestic agencies could perform this kind of analysis. The experts also had concerns about how domestic agencies could implement the Appellate Body rulings on the issue of unforeseen developments. Specifically, they were unsure how WTO members would show that increased imports causing serious injury resulted from developments they had not foreseen when they made tariff concessions or assumed other obligations under GATT. A few experts were surprised that the Appellate Body had resurrected the GATT requirement on unforeseen developments, which they thought had been abandoned and had not been specifically included in the Safeguards Agreement.

U.S. Agency Positions on Standard of Review and Other Trade Remedy Issues

In its December 2002 report to Congress, the executive branch concluded that, overall, the United States had fared well in WTO dispute settlement, including in a number of trade remedy cases. Nevertheless, the report raised concerns about how the WTO had applied standard of review in trade remedy cases and stated that some rulings were troubling in “their failure to recognize that agreement terms may be susceptible of multiple, reasonable interpretations among which WTO members may properly choose.” The report specifically criticized the Appellate Body ruling in United States—Antidumping Measures on Certain Hot-Rolled Steel Products from Japan for how it had applied the legal standard of review in article 17.6(ii).

The executive branch report also stated that in certain trade remedy cases, the WTO had found obligations and imposed restrictions on WTO members that were not supported by the texts of the WTO agreements. The report mentioned the rulings on facts available, unforeseen developments, nonattribution, and several others as examples. The report qualified these criticisms by stating that not all of the WTO findings it cited were based on a problematical analytical approach or that the WTO would have necessarily found in favor of the United States had the proper approach been used. Nevertheless, the report emphasized that the problematic findings were troubling due to their lack of grounding in the texts of the negotiated agreements.

During the course of our work, the Commerce Department and ITC officials reiterated these concerns. ITC officials indicated that they do not agree that the WTO has properly applied standard of review in trade remedy cases. Specifically, they stated that the WTO has applied article 17.6(ii) of the Antidumping Agreement in a manner that raises a question about whether the second sentence of the provision, requiring the WTO to uphold domestic agency determinations that rest on permissible interpretations of the Antidumping Agreement, has real meaning. In these officials’ view, the WTO has not allowed for more than one permissible interpretation of the relevant provisions. In this regard, the United States recently proposed that article 17.6 be considered as a topic for discussion in the Negotiating Group on Rules in the ongoing WTO negotiations. In its submission, the United States stated that panels and the Appellate Body have not accepted WTO members’ reasonable, permissible interpretations of the Antidumping Agreement.

ITC officials also stated that in some instances, the Appellate Body had ruled incorrectly on important issues and created new obligations, which do not appear in and are unsupported by the plain language of the relevant agreements. One example involved the Appellate Body findings on the nonattribution provision of the Safeguards Agreement. The ITC also found it particularly significant that the WTO had enunciated systemic requirements for this issue, as well as unforeseen developments, even though they are not specifically covered by U.S. law.

Agency Comments and Our Evaluation

We requested comments on a draft of this report from the Secretary of Commerce, the Chairman of the U.S. International Trade Commission, and the U.S. Trade Representative (USTR). The Commerce Department and the ITC provided written comments, which are reprinted in appendixes IV and V. We obtained oral comments from USTR officials, including the Assistant U.S. Trade Representative for Monitoring and Enforcement.

The Commerce Department had three areas of concern regarding our report. First, it emphasized the potential future impact of WTO trade remedy rulings on the U.S.’s ability to impose trade remedies, noting that this potential is far more significant than these rulings’ limited impact to date. Commerce cited, in particular, the possible negative ramifications of two WTO rulings. Specifically, it said that the ruling on privatization could impact a significant number of U.S. countervailing duty orders, and that as a result of the EU bed linen ruling, the EU has recently challenged more than 20 U.S. antidumping investigations and reviews. As a result of this increased emphasis, we modified the sections of this report that present U.S. agency views on the potential future ramifications of WTO decisions on the U.S.’s ability to impose trade remedies. Second, Commerce raised concerns regarding the composition of the group of legal experts we consulted and our characterization of their views as “majority” and “minority.” However, we believe that our methodology for selecting these experts was sound (see app. I). In addition, we believe that our report sufficiently addresses the concerns of the minority of experts. Nevertheless, we have made modifications to the relevant sections of our report to ensure that majority positions and minority concerns are presented in a balanced manner. Finally, Commerce expressed concern that we did not adequately address the executive branch’s views on the WTO’s application of standard of review and other trade remedy issues. As a result, we modified our report to give more prominent treatment to U.S. agency positions.

The ITC had two main areas of concern regarding the report. First, the ITC said that the report understated the full effect of WTO rulings on the ability of the United States to impose and maintain trade remedy measures in that the full effect of WTO rulings likely has not yet been realized, citing for example several systemic WTO requirements for safeguard determinations. In response to this comment as well a similar comment from the Commerce Department, we modified the relevant sections of the report as discussed above and used examples that the ITC cited. Second, the ITC did not agree that WTO panels and the Appellate Body have properly applied the standard of review in article 17.6(ii) of the Antidumping Agreement. In response to this concern, we have incorporated the ITC’s views in our report.

In addition, we obtained technical comments from the Commerce Department and the ITC, which we have incorporated into the report as appropriate. For example, Commerce noted that we had included challenges to WTO members’ sunset reviews in some of our statistics on trade remedy measures. As a result, we eliminated the sunset review challenges from our statistics.

USTR provided technical comments such as clarification of certain terminology. For example, USTR noted that the term “domestic determination” usually connotes a final decision by the appropriate agency as to whether dumping has occurred or whether increased imports have caused injury or are threatening injury to domestic industry. Accordingly, we clarified our definition in this report and made other technical changes as appropriate. USTR also noted that U.S. trade remedy measures had been challenged more frequently than those of other WTO members in part because U.S. trade remedy laws and investigations are more transparent. We have added this point to our report.

We are sending copies of this report to interested congressional committees, the U.S. Trade Representative, the Secretary of Commerce, and the Chairman of the U.S. International Trade Commission. We will also make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-4128. Other GAO contacts and staff acknowledgments are listed in appendix VI.

Objectives, Scope, and Methodology

The Ranking Minority Member of the Senate Committee on Finance asked us to conduct a review of the World Trade Organization’s (WTO) dispute settlement activity during the past 8 years, focusing on trade remedy disputes. Specifically, in this report we (1) identified the major trends in WTO dispute settlement activity concerning trade remedies; (2) analyzed the outcome of WTO rulings in completed trade remedy cases; (3) assessed the major impacts of these rulings on WTO members’ laws, regulations, and practices and on their ability to impose trade remedies; (4) identified the standards of review for trade remedy cases and Appellate Body guidance on how they should be applied; and (5) summarized legal experts’ views and U.S. agencies’ positions on standard of review and other trade remedy issues.

To identify the major trends in dispute settlement activity during the last 8 years, we developed a database containing all members’ requests for consultation (complaints) filed from 1995 through 2002. We obtained the data for the database from the WTO Web site, including data on each request for consultation; data on the complainant(s), defendant, and complaint date; and a short title. To determine which disputes related to trade remedies, we examined the short titles of the cases; the initial complaint filed with the WTO; and WTO documents, including the Update of WTO Dispute Settlement Cases, January 2003. Our analysis of trade remedy cases focused exclusively on cases brought under the WTO trade remedy agreements—the Antidumping Agreement, the Agreement on Safeguards, the Subsidies and Countervailing Measures Agreement, and parts of the General Agreement on Tariffs and Trade 1994.

To obtain the number 198 for formal dispute settlement cases filed with the WTO from 1995 through 2002, we combined multiple complaints against one WTO member on the same law, measure, or action into one distinct case for the purposes of our analysis. We did this because multiple WTO members can file complaints against one member. For example, 9 WTO members filed complaints regarding 1 U.S. steel safeguard measure imposed in March 2002. As a result, the 276 separate complaints filed from 1995 through 2002 resulted in 198 distinct cases.

To determine which WTO members imposed the most trade remedy measures from 1995 through 2002, we used WTO data that were based on the notifications filed with the WTO by each member. We excluded challenges to WTO members’ sunset reviews in our data on trade remedy measures in response to agency comments. For antidumping and countervailing duty measures, we used summary data that the WTO Secretariat compiled. Department of Commerce officials noted that these WTO data differ from Commerce’s data on U.S. antidumping and countervailing measures and recommended that we use Commerce data. However, because the WTO is the only source of comparable data on the use of trade remedy measures by all WTO members, we ultimately used the WTO data. For safeguards, we analyzed the information contained in the annual reports of the WTO Committee on Safeguards. These reports included information on both preliminary and definitive safeguard measures imposed.

To analyze the outcome of WTO rulings in the completed trade remedy cases, we compiled statistics on panel and Appellate Body findings about whether domestic agency determinations and members’ laws were found to be consistent or inconsistent with WTO trade remedy provisions. We defined “completed” cases as those cases in which the Dispute Settlement Body had adopted a panel or Appellate Body decision as of December 31, 2002. To analyze WTO findings about domestic determinations, for the most part, we reviewed the concluding findings at the end of the panel and Appellate Body reports. When several findings were included within a single paragraph in the concluding findings, we generally counted each finding separately. In the several instances in which concluding sections of panel reports did not clearly indicate these findings, we obtained our numbers by evaluating the full reports. For our statistics on findings about domestic agency determinations, we did not distinguish between more important issues—such as the causal relationship between increased imports and injury to domestic industry—and those that seemed less important—for example, notification requirements and certain evidentiary issues. To analyze direct challenges to members’ laws in the completed cases, we analyzed the full panel and Appellate Body reports.

To assess the major impacts of the WTO rulings in the completed trade remedy cases on members’ laws, regulations, and practices, and on their ability to impose trade remedies, we identified compliance actions taken, or in the process of being taken, by WTO members as a result of the rulings. First, we consulted the WTO Web site to find any and all official documents filed in the completed trade remedy cases. WTO members and relevant parties in the cases file such documents with the WTO to report actions taken following the rulings and recommendations of adopted panel and Appellate Body reports. Alternatively, some documents indicate only agreements between the relevant parties for compliance actions to be taken, or the status of any ongoing negotiations regarding compliance. For cases where official documentation regarding compliance actions was not found on the WTO Web site, we searched the Dispute Settlement Body archives. We also consulted U.S. agency officials on the one case in which the United States was the complainant.

For the cases in which the United States was the defendant, we also consulted officials from the Commerce Department, the U.S. International Trade Commission (ITC), and the U.S. Trade Representative (USTR). These officials provided us the most up-to-date information on the status of bilateral negotiations and U.S. intentions for certain completed cases where compliance information was not yet publicly available. In addition, we monitored congressional Web sites to glean information on the status of legislation in cases involving challenges to U.S. laws. Finally, we obtained copies of the changes to one U.S. regulation and two established practices from the Federal Register.

For cases not involving the United States, for the most part, we did not consult with foreign government officials. We relied primarily on official documents that WTO members and relevant parties had filed with the WTO to report their compliance actions and on pertinent comments from U.S. agency officials.

To identify the WTO standards of review for trade remedy cases, we analyzed the standards and obtained the views of legal experts, including practitioners and academics (see below). To identify how the panels and the Appellate Body were interpreting and applying the standards, we read the panel and Appellate Body reports for the trade remedy cases completed from 1995 through 2002 as well as Appellate Body reports for other relevant WTO dispute settlement cases. In reading these reports, we identified Appellate Body guidance on how the standards should be applied. Finally, we also read the provisions of the Vienna Convention on the Law of Treaties that the Appellate Body had identified as pertinent to how one of the standards should be applied.

To obtain and summarize legal experts’ views on WTO standard of review and other trade remedy issues, we conducted structured interviews with 18 legal experts, including practitioners, academics, and advisers on WTO- related trade remedy issues. In addition, we interviewed a current WTO official and an European Union (EU) official; however, in response to agency comments, we reviewed our decision rule on the composition of our expert group and excluded the WTO official and EU representative from our discussion of expert views, since we did not include U.S. agency officials in this group.

To identify the legal experts for our study, we conducted literature searches, read formal publications on WTO standard of review and trade remedies, sought recommendations from other experts and the International Trade Committee of the American Bar Association, and attended seminars on issues surrounding standard of review and trade remedies. Our main criteria for selecting the experts for our study were that they (1) had past experience with WTO trade remedy cases; (2) had been active in writing and/or speaking about issues pertaining to WTO dispute settlement, including standard of review and trade remedies; and (3) constituted a mix of experts representing or affiliated with U.S. domestic interests, foreign interests, or both. We did not choose experts on the basis of their expressed views, because we did not believe that this was methodologically sound. To obtain the views of the experts, we conducted structured interviews to ensure that we asked all of the experts the same questions. We coded the answers to key survey questions to help us analyze the experts’ views and assess the frequency with which particular views were held.

To write the case summaries, we consulted the WTO Web site and reviewed the panel and Appellate Body reports for the 25 completed trade remedy cases. We also reviewed the dispute settlement commentaries on the www.WorldTradeLaw.net Web site.

We performed our work from September 2002 to July 2003 in accordance with generally accepted government auditing standards.

Summaries of Completed WTO Trade Remedy Cases

Between the inception of the World Trade Organization (WTO) in 1995 and December 31, 2002, the WTO ruled on 25 cases involving the trade remedies of antidumping, countervailing duties (CVD), and safeguards. Table 3 lists the cases in order of their WTO dispute case number. It is followed by a brief summary of each case that includes information on the case's outcome and major issues.

GAO Case Number 1: Brazil – Measures Affecting Desiccated Coconut (DS 22)

In June 1994, Brazil initiated a countervailing duty (CVD) investigation to determine whether imports of desiccated coconut and coconut milk from Côte d’Ivoire, Indonesia, Malaysia, the Philippines, and Sri Lanka had been subsidized. Brazil imposed provisional CVDs on imports of desiccated coconut from all of these countries except Malaysia in March 1995 and final CVDs in August 1995.

The Philippines challenged the Brazilian CVDs under various provisions of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the World Trade Organization (WTO) Agreement on Agriculture. Brazil’s principal argument was that none of the WTO provisions relied upon by the Philippines applies in this case because the Brazilian subsidy investigation was initiated on the basis of an application received prior to the date the WTO Agreement entered into force.

Outcome

The Appellate Body upheld the panel finding that GATT 1994 provisions on CVD investigations did not apply because this dispute involved application of a Brazilian CVD measure based on an investigation initiated prior to January 1, 1995—the date on which the WTO Agreement entered into effect. Accordingly, the Appellate Body upheld the panel’s finding that the dispute was not properly before it.

Compliance Action

No compliance action was necessary.

GAO Case Number 2: Guatemala – Antidumping Investigation Regarding Portland Cement from Mexico (DS 60)

Mexico challenged both the initiation of Guatemala’s antidumping investigation of imports of grey portland cement from Mexico and various decisions and conduct of the Guatemalan domestic authority during the investigation. Guatemala’s principal claim was that Mexico’s panel request did not identify any of the three measures listed in article 17.4 of the Antidumping Agreement (ADA), and therefore the panel should not hear the claim.

Outcome

The panel found that Guatemala had failed to comply with article 5.3 of the ADA by initiating the antidumping investigation on the basis of insufficient evidence of dumping, injury, and casual link between dumping and injury. The panel also found that the matters referred to in Mexico’s panel request for establishment of a panel were properly before it. The Appellate Body reversed the panel and determined that the dispute was not properly before the panel because Mexico’s panel request did not identify the measure it was complaining about. Consequently, it did not consider the panel’s findings on article 5.3.

Compliance Action

After the Appellate Body effectively dismissed this case, Mexico brought the case again with a new panel request (see our case summary 11 of Guatemala – Definitive Antidumping Measures on Grey Portland Cement from Mexico, DS 156). The new panel considered many of the same issues that were involved in this case.

GAO Case Number 3: Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products (DS 98)

European Union (EU)

Nature of Complaint

The EU challenged Korea’s imposition of a safeguard measure on imports of skimmed milk powder preparations from the EU. The safeguard measure was in the form of a quantitative restriction on imports of these dairy products. The EU argued that Korea’s safeguard measure was inconsistent with various provisions of the Safeguards Agreement as well as article XIX:1 of GATT 1994. Generally, the EU contended that Korea had not shown that increases in imports resulted from “unforeseen developments,” had not examined all factors in its examination of serious injury, and had not adequately considered the extent of application of the safeguard measure.

Outcome

The Appellate Body upheld several panel findings that Korea had acted inconsistently with the Safeguards Agreement because of its determinations regarding serious injury. The Appellate Body also reversed a panel finding on the issue of “unforeseen developments.” Accordingly, it recommended that Korea bring its safeguard measure into conformity with the Safeguards Agreement.

Compliance Action

Korea reported to the WTO that it had effectively terminated the safeguard measure on imports of the dairy products on May 20, 2000. By lifting the safeguard measure, Korea considers that it has implemented the recommendations and rulings of the Dispute Settlement Body (DSB).

GAO Case Number 4: United States – Antidumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabyte or Above Originating from Korea (DS 99)

Korea challenged the U.S.’s failure to revoke an antidumping order on Korean dynamic random access memory semiconductors (DRAMS) of one megabyte or above. Korea contended that the U.S. regulatory standard under which it refused to revoke the antidumping order with respect to two Korean producers violated the ADA. Korea also challenged the Department of Commerce’s rejection of certain cost information and its application of the de minimis standard during the administrative review of the antidumping order.

Outcome

The panel found that the U.S. regulatory standard for revoking an antidumping order was inconsistent with the ADA. However, the panel also upheld several aspects of the U.S.’s application of its antidumping laws. The panel recommended that the DSB request that the United States bring its regulatory standard for revoking an antidumping order, and the results of its third administrative review, into conformity with its obligations under the ADA. The parties did not appeal the panel findings.

Compliance Action

The United States took several compliance actions as a result of the panel’s findings. The United States deleted the “not likely” criterion from its regulation and replaced 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.” Using this modified standard, the United States found that the continued application of the dumping order was necessary to offset dumping and, accordingly, did not revoke the antidumping order. Korea asserted that these actions failed to comply with the DSB’s recommendations and rulings. During the compliance panel proceeding, however, the United States revoked the antidumping order as a result of the U.S. sunset review process, primarily because the petitioner withdrew from the proceeding. The United States and Korea then notified the DSB of a mutually agreed- upon solution to the dispute, and the compliance panel proceeding was terminated.

GAO Case Number 5: Argentina – Safeguard Measures on Imports of Footwear (DS 121)

European Union (EU)

Nature of Complaint

The EU challenged Argentina’s imposition of safeguards on imports of EU footwear. The safeguard measure took the form of minimum specific duties on these imports. For several years prior to this EU challenge, Argentina had maintained various measures regarding imports of footwear and other clothing and textiles. The EU contended that the safeguard measure violated article XIX:1(a) of GATT 1994 and various provisions of the Safeguards Agreement.

Outcome

The Appellate Body upheld panel findings that Argentina’s safeguard investigation and determinations of increased imports, serious injury, and causation were inconsistent with articles 2 and 4 of the Safeguards Agreement, and thus there was no legal basis for applying safeguards. As a result, it recommended that the DSB request that Argentina bring its safeguard measures into conformity with its obligations under the Safeguards Agreement.

Compliance Action

Argentina indicated to the WTO in February 2000 that it intended to implement the DSB’s rulings and recommendations.

GAO Case Number 6: Thailand – Antidumping Duties on Angles, Shapes, and Sections of Iron or Non-Alloy Steel and H- Beams from Poland (DS 122)

Poland challenged Thailand’s imposition of antidumping duties on imports of certain Polish steel products. The final antidumping duty was a percentage of a determined value of these products. Poland contended that Thailand’s injury and dumping determinations were inconsistent with various provisions of the ADA.

Outcome

The Appellate Body affirmed the panel’s findings that Thailand had violated the ADA with regard to Thailand’s findings about injury to domestic industry and the causal relationship between dumped imports and injury to domestic industry. Although the Appellate Body also upheld the panel’s application of the standard of review in article 17.6(ii) of the ADA, it reversed a panel interpretation of article 17.6(i). As a result of these rulings, the Appellate Body recommended that the DSB request that Thailand bring its antidumping measure into conformity with its obligations under the ADA.

Compliance Action

Thailand reexamined aspects of the injury determination that the panel and Appellate Body had found to be inconsistent with the ADA and found that the antidumping measure should be maintained. Subsequently, in December 2001, Thailand informed the WTO that it had fully implemented the DSB’s recommendations. In January 2002, Poland and Thailand announced they had reached agreement that this case should no longer be on the DSB’s agenda.

GAO Case Number 7: Mexico – Antidumping Investigation of High- Fructose Corn Syrup (HFCS) from the United States (DS 132)

The United States challenged Mexico’s imposition of antidumping duties on imports of two grades of high-fructose corn syrup (HFCS) from the United States. The final antidumping measure imposed duties of up to $175.50 per metric ton of imported HFCS and ordered the collection of duties retroactive to the imposition of provisional duties. The United States contended that both the initiation of the antidumping investigation and the determination of threat of injury were inconsistent with the ADA.

Outcome

Although the panel upheld the way in which Mexico initiated its antidumping investigation, it concluded that Mexico’s imposition of the antidumping measure was inconsistent with various provisions of the ADA. As a result, the panel recommended that the DSB request that Mexico bring its antidumping measure into conformity with its obligations under the ADA. The panel findings were not appealed.

Compliance Action

Mexico revised its antidumping determination following the panel report. However, in a subsequent proceeding, Mexico again concluded that the imports of HFCS constituted a threat of material injury to the domestic sugar industry. As a result, the United States requested a compliance review under article 21.5 of the DSU. In the article 21.5 proceeding, the Appellate Body upheld panel findings that Mexico’s revised determination was inconsistent with various provisions of the ADA. According to U.S. officials, Mexico revoked the antidumping measure in May 2002.

GAO Case Number 8: United States – Antidumping Act of 1916 (DS 136/162)

Nature of Complaint

Japan and the EU separately challenged section 801 of the Revenue Act of 1916 (1916 Act) as being inconsistent with article VI of GATT 1994 and various provisions of the ADA. Section 801 of the 1916 Act allows for private claims against, and criminal prosecutions of, parties that import or assist in importing goods into the United States at a price substantially less than actual market value or wholesale price. The Japan and EU challenges were to the law itself rather than to its implementation.

Outcome

The Appellate Body affirmed the panel conclusions that antidumping legislation, including the 1916 Act, can be directly challenged, absent any particular application. It also upheld the panel findings that the 1916 Act itself was inconsistent with article VI of GATT 1994 and various provisions of the ADA. Accordingly, the Appellate Body recommended that the United States bring the 1916 Act into conformity with its obligations under these agreements.

Compliance Action

The United States continues to work to enact legislation to implement the WTO ruling. Although a number of bills have been introduced in the Congress calling for repeal of section 801 of the 1916 Act, to date no legislation has been passed. As of July 15, 2003, the latest bills were H.R. 1073, introduced in the House of Representatives on March 4, 2003; S. 1080, introduced in the Senate on May 19, 2003; and S. 1155, introduced in the Senate on May 23, 2003. The bills are somewhat different in that the repeals under H.R. 1073 and S. 1155 would not affect pending cases, whereas the S. 1080 repeal would apply to them.

GAO Case Number 9: United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the

European Union (EU)

United Kingdom

(DS 138)

The United States imposed CVDs on imports of certain hot-rolled lead and bismuth carbon steel products originating in the United Kingdom, as a result of alleged subsidies the British Government granted to British Steel Corporation, a state-owned company, between 1977 and 1986. The British Government began the privatization of British Steel in 1986 and completed it in 1988. The Commerce Department found the sale to be at arm’s length for fair market value and consistent with commercial considerations. Notwithstanding these factors, the Commerce Department imposed CVDs on these United Kingdom imports, initially in 1993 and in subsequent annual reviews, on the grounds that a certain proportion of the subsidies granted to British Steel had passed through to the new entities. The EU claimed that the U.S. methodology in calculating the amount of these subsidies was inconsistent with several provisions of the WTO SCM Agreement.

Outcome

The Appellate Body upheld the panel finding that the financial contributions provided to British Steel did not confer a benefit on the new owners. In doing so, the Appellate Body also upheld a panel finding that faulted the Commerce Department’s methodology in presuming that a benefit had been provided to the new owners. Accordingly, it found that the U.S. CVDs were inconsistent with the SCM Agreement and recommended that the DSB request that the United States bring its measures into conformity with its obligations under that agreement. The panel suggested that the United States take all appropriate steps, including revision of its administrative practices, to prevent a violation of the SCM Agreement, but the Appellate Body did not make this specific recommendation.

Compliance Action

Prior to the issuance of the Appellate Body report, the Commerce Department revoked the CVD measure in response to a request from the U.S. industry. However, the Commerce Department changed its methodology as a result of related domestic litigation.

GAO Case Number 10: European Union – Antidumping Duties on Imports of Cotton-Type Bed Linen from India (DS 141)

European Union (EU)

Nature of Complaint

India challenged the EU’s imposition of antidumping duties on imports of various types of cotton bed linens from India. Due to the high number of domestic producers involved in its investigation, the EU established a sample of domestic producers consisting of 17 of the 35 companies identified as the EU industry. The dumping duties that were imposed differed in amount depending on the exporter in question. India argued that the imposition of antidumping duties was inconsistent with various provisions of the ADA. One of the principal issues involved the EU’s practice of zeroing in calculating antidumping margins.

Outcome

The Appellate Body affirmed the panel’s finding that the EU’s practice of zeroing was inconsistent with the ADA. The Appellate Body also reversed several panel findings and concluded that the EU had acted inconsistently with the ADA in calculating amounts for administrative, selling, and general costs and profits in its investigation. As a result, the Appellate Body recommended that the DSB request that the EU bring its antidumping measure into conformity with its obligations under the ADA.

Compliance Action

After the DSB adopted the Appellate Body report, the EU established lower dumping margins for Indian imports of bed linens. Although it also concluded that dumped imports from India were still causing material injury to the EU industry, the EU suspended application of the duties for these imports. In a subsequent proceeding, the EU determined that there was a causal link between dumped imports from India and material injury to the EU industry, but the EU continued to suspend imposition of the antidumping duties. Because India believed that the EU had not complied with the recommendations of the DSB, it brought a proceeding under article 21.5 of the DSU contesting compliance. Although the panel in the article 21.5 proceeding determined that the EU had implemented the recommendation of the DSB, the Appellate Body reversed and found that the EU was still acting inconsistently with the ADA. Accordingly, it recommended that the DSB request that the EU bring its antidumping measure into conformity with that agreement.

GAO Case Number 11: Guatemala – Definitive Antidumping Measures on Grey Portland Cement from Mexico (DS 156)

In 1999, Mexico challenged Guatemala’s imposition of an antidumping measure on imports of portland cement from Mexico. The measure was in the form of an antidumping duty of 89.54 percent that was imposed on these imports. In its challenge, Mexico contended that the initiation and conduct of the antidumping investigation and the imposition of the measure violated article VI of GATT 1994 and various provisions of the ADA.

Mexico’s challenge was a follow-up to an earlier Mexican challenge to Guatemala’s imposition of antidumping duties on imports of the same product (see case summary 2). Although the panel in that case ruled that Guatemala had acted inconsistently with several provisions of the ADA and recommended that Guatemala revoke the dumping order, the Appellate Body reversed the panel and found that the dispute was not properly before the panel.

Outcome

The panel determined that Guatemala did not properly determine that there was sufficient evidence to justify initiation of the antidumping investigation. It also found that Guatemala did not properly determine that the imports under investigation were being dumped, that the domestic producer of cement in Guatemala was being injured, or that the imports were the cause of the injury. Accordingly, it concluded that Guatemala had acted inconsistently with various provisions of the ADA. Under the authority provided in article 19.1 of the DSU, the panel recommended that Guatemala revoke its antidumping measure on these imports. However, the panel rejected a Mexican request that the panel recommend that Guatemala refund previously collected antidumping duties. The panel findings were not appealed.

Compliance Action

In December 2000, Guatemala informed the WTO that it had removed the antidumping measures in question and complied with its recommendations.

GAO Case Number 12: United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities (DS 166)

European Union (EU)

Nature of Complaint

The EU challenged a United States safeguard measure imposed on imports of wheat gluten from the EU. The safeguard measure consisted of a quantitative restriction on these imports for 3 years. The United States excluded products from Canada, a U.S. NAFTA partner, and from certain other WTO members from the application of the safeguard. The EU contended that the safeguard measure violated provisions of the Safeguards Agreement and GATT 1994. The EU complaints were directed at the U.S.’s serious injury determination, its causation analysis, and its findings about the relationship between the members included in its investigation and those covered by the safeguard measure.

Outcome

The Appellate Body found that the U.S.’s safeguard measure was applied inconsistently with the Safeguards Agreement and GATT 1994 and recommended that the DSB request that the United States bring the measure into conformity with those agreements. Although the Appellate Body upheld part of the panel findings on serious injury, it reversed the panel findings on another serious injury issue and on an important aspect of the panel’s causation analysis. In addition, the Appellate Body agreed with the panel that the United States inappropriately excluded imports from Canada from its safeguard measure after including such imports in its injury investigation.

Compliance Action

The safeguard measure expired in June 2001.

GAO Case Number 13: United States – Safeguard Measures on Imports of Fresh, Chilled, or Frozen Lamb Meat from New Zealand and Australia (DS 177/178)

Australia and New Zealand challenged a U.S. safeguard measure imposed on imports of fresh, chilled, and frozen lamb meat from New Zealand and Australia. The measure was in the form of a tariff rate quota that was to span 3 years. The safeguard measure did not apply to imports from Canada, Mexico, certain other U.S. trading partners, and developing countries. Australia and New Zealand contended that the safeguard measure violated various provisions of the Safeguards Agreement and GATT 1994. Their complaints were directed at U.S. findings about the definition of the domestic lamb meat industry, the existence of serious injury, and the causal relationship between increased imports and injury to the domestic lamb meat industry.

Outcome

The Appellate Body found that the United States safeguard measure was applied inconsistently with the Safeguards Agreement and GATT 1994 and recommended that the DSB request that the United States bring its measure into conformity with those agreements. Although the Appellate Body upheld a number of important panel findings—including those involving the definition of the domestic lamb meat industry, serious injury, and a part of the panel’s causation analysis—it reversed the panel’s interpretation of the causation requirements in the Safeguards Agreement.

The Appellate Body also concluded that the panel incorrectly applied the standard of review in article 11 in evaluating the U.S.’s determination about the existence of a threat of serious injury.

Compliance Action

In August 2001, the United States decided to end the application of the safeguard measure on imports of lamb meat, effective in November 2001.

GAO Case Number 14: United States – Antidumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea (DS 179)

Korea challenged several aspects of the U.S. antidumping investigation and measures on imports of stainless steel plate in coils (plate) and stainless steel sheet and strip (sheet) from Korea. Specifically, Korea challenged the U.S. treatment of currency conversions and of sales to U.S. companies that failed to pay for the imports due to bankruptcy. Finally, Korea challenged the U.S. calculation of the dumping margin.

Outcome

The panel found several aspects of the U.S. investigation to be inconsistent with the ADA. It found that the currency conversions in the sheet investigation were inconsistent with the ADA, though it also found that the conversions in the plate investigation were consistent with the ADA. The panel also found the U.S. treatment of sales for which payment was never received and its use of multiple averaging periods in its calculation of dumping margins were inconsistent with the ADA. Accordingly, the panel recommended that the United States bring its antidumping duties on Korean steel plate and sheet into compliance with the ADA. The panel findings were not appealed.

Compliance Action

As of April 2003, the antidumping orders were still in effect. According to officials from the Commerce Department, the United States made some revisions in its calculation of dumping margins in this case.

GAO Case Number 15: United States – Antidumping Measures on Certain Hot-Rolled Steel Products from Japan (DS 184)

Japan challenged the U.S.’s imposition of antidumping duties on imports of hot-rolled steel products from Japan. Japan claimed that certain provisions of U.S. antidumping laws, regulations, and administrative procedures were inconsistent with the ADA. For example, Japan challenged the U.S.’s application of “facts available” and adverse facts as inconsistent with its ADA obligations. Japan also challenged the U.S.’s statutory method for calculating an “all others” rate as inconsistent with the ADA.

Outcome

The Appellate Body upheld panel findings of U.S. violations relating to the use of facts available, adverse facts, calculation of all other rates, and application of the arm’s-length test. The Appellate Body also reversed the panel finding on the issue of nonattribution without specifically finding against the United States on that issue. Although the Appellate Body upheld a panel finding that United States law on captive production was consistent with the ADA, it reversed the panel’s finding that the United States had applied the law properly. As a result of the findings against the United States, the Appellate Body recommended that the DSB request that the United States bring its measures into conformity with the ADA. The Appellate Body also made important statements about the standard of review in article 17.6 of the ADA.

Compliance Action

In November 2002, the United States completed a new antidumping determination that implemented the recommendations and rulings of the DSB. As a result of the changes made to the dumping margin calculations, the dumping margins for all three companies and all others were reduced.

The United States also revised its rules regarding its arm’s-length test to determine if sales are “in the ordinary course of trade.” The United States continues work to implement the recommendations and rulings regarding the U.S. antidumping statutory provision on the “all others rate.” The United States and Japan agreed to extend the deadline for implementation to December 2003, or until the end of the first session of the next Congress, whichever is earlier.

GAO Case Number 16: Argentina – Definitive Antidumping Measures on Imports of Ceramic Floor Tiles from Italy (DS 189)

European Union (EU)

Nature of Complaint

The EU challenged Argentina’s imposition of antidumping measures on imports of ceramic floor tiles from Italy. The antidumping measures took the form of specific antidumping duties that were based on the difference between the actual import price and a designated minimum export price, whenever the former was lower than the latter. The EU claimed that the antidumping measures were inconsistent with various provisions of the ADA. Among other things, the EU maintained that Argentina disregarded important information provided by exporters, failed to allow for differences in physical characteristics between models of tiles exported to Argentina and those sold in Italy, and did not inform Italian exporters of important facts that formed the basis for the decision to apply antidumping measures.

Outcome

The panel found that Argentina acted inconsistently with various provisions of the ADA and upheld most of the EU claims. As a result, the panel recommended that Argentina bring its antidumping measures into conformity with its obligations under the ADA. The panel findings were not appealed.

Compliance Action

In May 2002, Argentina informed the DSB that on April 24, 2002, it had revoked the antidumping measure at issue in this case.

GAO Case Number 17: United States – Measures Treating Export Restraints as Subsidies (DS 194)

Canada directly challenged a number of U.S. legal measures that it argued required the United States to treat export restraints as financial contributions, and thus potential subsidies, in violation of the SCM Agreement. Canada argued that export restraints could result in providing subsidies to other products that used or incorporated the restricted product when the domestic price of the restricted product was affected by the restraint. Canada’s challenge was only to U.S. legal measures and not to a particular instance in which an export restraint had been the subject of a CVD investigation.

Outcome

The panel found against Canada and concluded that U.S. CVD law is not inconsistent with the SCM Agreement; U.S. law does not require that export restraints be treated as financial contributions and thus subsidies. In addition, the panel suggested that three of the legal measures Canada contested could not be challenged independently of the relevant U.S. statute. To facilitate its analysis of the challenge to the U.S. legal measures, the panel first concluded that export restraints, as defined in the dispute, do not constitute financial contributions within the meaning of the SCM Agreement. The panel findings were not appealed.

Compliance Action

No compliance action was necessary.

GAO Case Number 18: United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line

(DS 202)

Korea challenged the U.S. imposition of a safeguard measure on imports of certain line pipe from Korea. The safeguard measure that was imposed was in the form of a duty increase for 3 years. The measure applied to imports from all WTO members except Canada and Mexico. Korea maintained that parts of the U.S. investigation as well as the safeguard measure itself violated provisions of the Safeguards Agreement and GATT 1994.

Outcome

The panel and the Appellate Body found several aspects of the U.S. safeguard measure to be inconsistent with provisions of the Safeguards Agreement and GATT 1994. This included U.S. determinations about causation. The Appellate Body also reversed several panel findings about exclusion of certain WTO members from the safeguard measure and the extent of application of the measure, which resulted in findings against the United States. The Appellate Body also reversed the panel on one of its injury findings, which resulted in upholding a United States determination. As a result of the findings against the United States, the Appellate Body recommended that the DSB request that the United States bring its measure into conformity with the Safeguards Agreement and GATT 1994.

Compliance Action

In July 2002, the United States and Korea agreed on several steps to implement the recommendations of the DSB. They agreed that the United States would increase the amount of imports exempt from additional tariffs, beginning in September 2002 and ending in March 2003. The measure then expired in March 2003.

GAO Case Number 19: United States – Antidumping and Countervailing Measures on Steel

(DS 206)

India challenged several aspects of the U.S. antidumping investigation for imports of steel plate from India. Specifically, India challenged the U.S. rejection of certain sales information and its reliance on facts available in its investigation. India further challenged U.S. statutory provisions governing the use of “facts available” and the U.S. treatment of India as a developing country.

Outcome

The panel upheld the U.S. statutory provisions governing the use of “facts available,” but found that the United States had not provided a legally sufficient justification for rejecting some sales information during its investigation. Accordingly, the panel recommended that the DSB request that the United States bring its antidumping measure into conformity with its obligation under the ADA. The panel also found that the U.S. “practice” governing total facts available is not a “measure” that can violate the ADA. The panel findings were not appealed.

Compliance Action

In February 2003, the United States informed the DSB that it had implemented the WTO’s ruling by issuing a second determination regarding antidumping duties imposed on imports of steel plate from India. Also in February 2003, the United States and India came to an agreement regarding the procedure to be followed if India believes that the United States has not fully complied with the findings and recommendations of the DSB.

GAO Case Number 20: Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products (DS 207)

Argentina made two distinct challenges to Chilean restrictions on imports of Argentine wheat, wheat flour, sugar, and edible vegetable oils. Thus, Argentina challenged both Chile’s price band system, which Chile applied to calculate tariff rates on these imports, and its imposition of safeguard measures on these imports. In certain situations, the use of Chile’s price band system resulted in tariff rates higher than the bound tariff rate in Chile’s WTO schedule. Chile also used its price band system to calculate the safeguard measures it imposed on the Argentine imports. Argentina claimed (1) that Chile’s price band system violated GATT 1994 and the WTO Agreement on Agriculture and (2) that Chilean safeguards violated various provisions of the Safeguards Agreement as well as GATT 1994. Argentina’s safeguards challenges were directed at how Chile evaluated increases in imports, the causal connection between imports and injury to Chile’s domestic industry, and the scope of the safeguard measures.

Outcome

With respect to the safeguards issues, the panel determined that Chile had violated various provisions of the Safeguards Agreement and GATT 1994. Nevertheless, the panel did not make a recommendation regarding removal of the safeguard measures because they had been removed before the panel published its report. Although the panel findings on safeguards were not appealed, the Appellate Body upheld panel findings that Chile’s price band system was inconsistent with GATT 1994 and the Agreement on Agriculture. As a result, the Appellate Body recommended that the DSB request that Chile bring its price band system into conformity with its obligations under the Agreement on Agriculture.

Compliance Action

No action was required with regard to the safeguard measures. Chile’s compliance with regard to its price band system involves the WTO Agreement on Agriculture and is due by December 23, 2003.

GAO Case Number 21: Egypt – Definitive Antidumping Measures on Steel Rebar from Turkey (DS 211)

Turkey challenged Egypt’s imposition of antidumping duties on imports of steel rebar from Turkey. The antidumping duties imposed ranged from about 23 percent to 61 percent, depending on the exporter. Turkey contended that Egypt’s determinations of injury and dumping and the causal relationship between the dumped imports and injury to domestic injury were inconsistent with the ADA. A number of Turkey’s claims involved questionnaires that the Egyptian investigating authority sent to respondent companies requesting information about sales prices and the cost of producing rebar.

Outcome

Although the panel upheld 19 determinations of the Egyptian investigating authority, it found that Egypt had violated articles 3.4 and 6.8 of the ADA. Accordingly, the panel recommended that Egypt bring its definitive antidumping measure on imports of steel rebar from Turkey into compliance with the ADA. The panel findings were not appealed.

Compliance Action

In November 2002, Egypt and Turkey informed the WTO that they had agreed Egypt would implement the DSB’s recommendations and rulings by July 31, 2003. In May 2003, Egypt reported to the WTO that it was reexamining the dumping calculations of two Turkish companies, and the general injury assessment, in light of this case.

GAO Case Number 22: United States – Countervailing Measures Concerning Certain Products from the European Communities

European Union (EU)

(“Privatization”)

(DS 212)

The EU challenged U.S. CVDs resulting from 12 investigations on imports of certain EU steel products. The steel products subject to these proceedings were formerly produced by state-owned enterprises that had been privatized in arm’s-length transactions for fair market value. The EU complained that the two methodologies the United States used to determine whether past subsidies continued to benefit the privatized company violated the SCM Agreement. In addition, the EU claimed that a provision of U.S. countervailing law—section 771(5)(F) of the Tariff Act of 1930—was, on its face, inconsistent with that agreement.

Outcome

The panel found that where a privatization is at arm’s length and for fair market value, the benefit from a prior subsidy to a state-owned enterprise is not passed on to the privatized entity. The Appellate Body affirmed the panel’s finding that the Commerce Department’s privatization methodologies were inconsistent with the SCM Agreement but disagreed with the panel reasoning that a fair market value sale of a government entity necessarily extinguishes prior subsidy benefits. The Appellate Body reversed the panel and found that section 771(5)(F) of the Tariff Act of 1930 was consistent with the SCM Agreement.

Compliance Action

On June 23, 2003, the Commerce Department published in the Federal Register its final modification to its privatization practice in order to comply with the WTO’s rulings and recommendations. The parties have agreed that the United States will use the new methodology in the 12 disputed investigations and reviews by November 8, 2003, and in future cases. In addition, Commerce is evaluating how many other CVD orders might be affected by this new methodology.

GAO Case Number 23: United States – Countervailing Duties on Certain Corrosion- Resistant Carbon Steel Flat Products from Germany (“Sunset”) (DS 213)

European Union (EU)

Nature of Complaint

The EU challenged provisions of U.S. countervailing law and regulations as well as application of the law and regulations to a sunset review of a CVD order on certain imports of carbon steel from Germany. The EU argued that, among other things, the United States had acted inconsistently with the SCM Agreement by automatically self-initiating the sunset review, by failing to apply a 1 percent de minimis standard of subsidization set forth in the SCM Agreement, and by applying an improper standard to determine whether a continuation or recurrence of subsidization was likely.

Outcome

The Appellate Body upheld the panel findings that U.S. laws—regarding (1) the automatic self-initiation of sunset reviews and (2) the obligation in the SCM Agreement to determine the likelihood of continuation or recurrence of subsidization in sunset reviews—were consistent with the SCM Agreement. Nevertheless, with regard to the de minimis standard, the Appellate Body reversed the panel and found that the 1 percent de minimis standard applied only to initial CVD investigations and not to sunset reviews of CVD orders. Accordingly, it found that U.S. law setting forth a de minimis subsidization threshold for sunset reviews below that set forth for original investigations, as well as its application, was consistent with the SCM Agreement.

In an issue that was not appealed, the panel found that the United States had acted inconsistently with the SCM Agreement in the sunset review by failing to properly determine the likelihood of the continuation or recurrence of subsidization. On the basis of this finding, the Appellate Body recommended that the United States bring its CVD measure into conformity with the SCM Agreement.

Compliance Action

The United States has agreed to implement the panel’s finding on the likelihood of continuation or recurrence of subsidization. Commerce Department officials said that implementation would require the agency to conduct a new sunset analysis with respect to this particular German steel order, but would not require a regulatory change.

GAO Case Number 24: United States – Section 129(c)(1) of the Uruguay Round

(DS 221)

Canada directly challenged section 129(c)(1) of the U.S. Uruguay Round Agreements Act (URAA), claiming that it was inconsistent with provisions of a number of WTO agreements. Canada specifically argued that section 129(c)(1) of the URAA has the effect of requiring the United States to act inconsistently with or precludes the United States from complying with various agreements.

Outcome

Canada failed to establish that section 129(c)(1) is inconsistent with WTO rules. The panel findings were not appealed.

Compliance Action

No compliance action was necessary.

GAO Case Number 25: United States – Preliminary Determinations With Respect to Certain Softwood Lumber from Canada (DS 236)

Canada challenged the U.S. imposition of provisional CVD measures on certain softwood lumber imports from Canada. Canada also claimed that the U.S. law and regulations concerning expedited and administrative reviews of CVD orders were, in several respects, inconsistent with the SCM Agreement and Article VI of GATT 1994.

Outcome

Although the panel upheld the United States on several issues, including the direct challenges to U.S. law, it found that the methodology the Commerce Department used to determine the subsidy benefit was inconsistent with the SCM Agreement. The panel also found that the Commerce Department’s retroactive application of the provisional measure was inconsistent with the SCM Agreement. Accordingly, it recommended that the DSB request that the United States bring its provisional measure into conformity with its obligations under that agreement. The panel findings were not appealed.

Compliance Action

In November 2002, the United States notified the DSB that the CVD measures challenged by Canada were no longer in effect and that the provisional cash deposits had been refunded. Canada, however, argued that Commerce’s final determination was substantially unchanged and subsequently brought another WTO complaint challenging that determination. The WTO panel’s decision in that case is due to be made public around the time this report is issued.

Experts That GAO Interviewed for this Report

Comments from the Department of Commerce

The following are GAO’s comments on the Department of Commerce’s letter dated July 14, 2003.

GAO Comments

1. Our report presents data on changes to WTO members’ laws, regulations, and practices that have resulted from WTO rulings through December 2002. The data clearly indicate there have been few changes in WTO members’ laws, regulations, and practices to date.

2.

In response to the Commerce Department’s (and the ITC’s) comment(s), we modified our characterization of U.S. agency views on the impact of WTO rulings on the U.S.’s ability to impose trade remedies. The sections of this report that provide U.S. agencies’ viewpoints now reflect the agencies’ increased emphasis on the potential future ramifications of WTO decisions indicated by the Commerce Department (and ITC). 3. The Commerce Department states that our report’s presentation implies that the impact of the WTO dispute settlement system on members’ ability to impose trade remedies must be small based on statistical information we present. However, our report simply provides data on the number of WTO members’ measures that were notified to the WTO from 1995 through 2002 and the number that were challenged. Moreover, we have modified the report to reflect agency concerns about the impact of the dispute settlement system on members’ ability to impose trade remedies. 4. While our report provides aggregate data on the number of trade remedy measures imposed by all WTO members from 1995 to 2002, it was beyond the scope of our review to analyze trends in the growth of these measures for individual WTO members and reasons for the challenges to these measures. 5. While the Commerce Department raised concerns regarding the composition of the group of legal experts we consulted, we believe that our methodology for selecting these experts as outlined in appendix I is sound. As noted, we selected individuals who were identified as leading experts on WTO dispute settlement. These individuals— academics, practitioners, and advisors on WTO-related trade remedy issues—have been active in writing and/or speaking about issues pertaining to WTO dispute settlement. Moreover, the Commerce Department’s assertion that we only included three experts representing domestic petitioners’ interests is incorrect. Although we did not choose experts on the basis of their expressed views because we believe that approach would have been methodologically flawed, our information indicates that of the nine practitioners we interviewed, three represent domestic petitioners, three represent foreign respondents, and three represent both. Nevertheless, in responding to agency comments, we reviewed our decision rule on the composition of the group of experts we consulted. Subsequently, we excluded the views of the current WTO official and the EU representative from our discussion of expert views since we did not include current U.S. officials in this group. However, we briefly noted the views of the current WTO and EU officials. 6. While we believe that our report sufficiently emphasizes the concerns of the minority of experts regarding standards of review and the other trade remedy issues discussed in this report, we have made modifications to the relevant sections of our report to ensure that majority positions and minority concerns are presented in a balanced manner. 7. See comment 2. 8.

In response to the Commerce Department’s (and the ITC’s) comment(s), we added a section to our report presenting U.S. agencies’ positions on WTO dispute settlement issues, including the executive branch’s position as outlined in its December 2002 report to Congress.

9.

In response to the Commerce Department’s comments, we have added material to our report that discusses relevant aspects of the recent U.S. submission to the WTO Negotiating Group on Rules.

Comments from the United States International Trade Commission

The following are GAO’s comments on the U.S. International Trade Commission’s letter dated July 14, 2003.

GAO Comments

1.

In response to the ITC’s (and Commerce’s) comment(s), we modified our characterization of U.S. agency views on the impact of WTO rulings on the U.S.’s ability to impose trade remedies. The sections of this report that provide U.S. agencies’ viewpoints now reflect the agencies’ increased emphasis on the potential future ramifications of WTO decisions.

2.

In response to the ITC’s comments, we have added some discussion of the safeguards issues that the ITC raises in the report’s section on expert views and U.S. agencies’ positions.

3.

In response to the ITC’s comments, we have added some discussion of their views on article 17.6(ii) in the report’s section on expert views and U.S. agencies’ positions. 4. See comment 1.

GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to those named above, Jason Bair, Josey Ballenger, Sharron Candon, Martin De Alteriis, Rona Mendelsohn, Mary Moutsos, Mark Speight, and Laura Turman made key contributions to this report.

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