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In breach of world trade rules

The Dispute Settlement Body of the World Trade Organisation (WTO) recently ruled illegal certain provisions of the U.S. laws — and thereby hangs a tale. The point of interest in this matter for the wider world is not just the merits of the complaint — raised mainly by the European Community — that U.S. laws allowed export subsidies to its corporations operating overseas in violation of GATT/WTO agreements. The significance lies in the course the case took in the WTO. The story-inside-story of the "Foreign Sales Corporation case" started with the raising of the dispute by the European Community as early as 1997. Every known dispute resolution process of the WTO — consultations, constitution of a panel to hear disputes, appellate panel, compliance review panel and arbitration — was gone through, each at least twice over, to get the U.S. to honour the first ruling that went against it. In the course of these tortuous proceedings, the U.S. introduced two new laws, ostensibly to ensure compliance of national laws with the first final ruling of WTO bodies in the case, but these two laws also have now been held to contravene GATT/WTO agreements. For some time in the intervening period, the European Union had imposed retaliatory sanctions against the U.S., as allowed by WTO regulations, by way of compensation for the damage to its interests arising from the U.S. failure to honour the world trade body's verdict.

The whole case is illustrative of how even the most ardent champion of the WTO system finds it difficult to align domestic interests and pressures with the WTO regime despite the fact that the U.S., as required by its Constitution, had got the Uruguay Round agreements ratified by Congress. Similarly tortuous has been the case related to the Byrd Amendment, introduced during the Clinton administration in 2000, which enabled U.S. manufacturers involved in anti-dumping complaints against imports, to be given the proceeds of the punitive levies. The refund of duties was challenged in the "Byrd Amendment case" in the WTO by major trade partners like the EU and also countries like India. Held illegal by a WTO panel and the appellate panel, the American law was again subject to a dispute regarding the time asked for by the U.S. to enforce the ruling. It was finally repealed by Congress in February, though only with prospective effect from October 2007. There are, of course, a few more landmark cases of other major trading powers evading implementation of decisions of the world body, although ultimately they fell in line. The lesson from all this is that fair trade is easy to preach but difficult to practise within the framework of the nation-state system. On the positive side, it shows that unlike many other multilateral institutions, including the United Nations, the WTO is a forum where the mighty can lose a case as easily as humble members and the rule of (WTO) law, even if not entirely equitable, does prevail.

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