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The objective of the roundtable was to examine options and challenges in the use of cross-retaliation in TRIPS and GATS with a view to enable developing countries to make effective use of it under the WTO Dispute Settlement system.
 
Professor Frederick M. Abbott and Dr. Arthur E. Appleton presented the findings of two studies, commissioned by ICTSD, in which they respectively investigate the legal, technical and economic problems raised in the use of cross-retaliation under TRIPS and GATS, and present possible solutions to these problems.
 
Background
Cross-retaliation refers to the suspension of concessions in a sector of trade different than the sector in which the trade injury is suffered, including under a different WTO agreement. The incorporation of the “new area” agreements of TRIPS and GATS, as a consequence of the Uruguay Round negotiations, introduced a more complex era in dispute settlement and retaliation. For many developing countries, suspension of concessions in TRIPS or GATS may represent a valuable alternative option when it is not practical or effective for them to rely on standard retaliation. This is often the case due to the unbalanced nature of trading relations and the asymmetry in economic power.
 
However, this option has rarely been used by developing countries. Thus, the complex legal and technical problems, as well as the economic consequences, of resorting to cross-retaliation under the TRIPS Agreement and the GATS need to be examined comprehensively, in order for developing countries to make effective use of this option.
 
Professor Abbott has investigated cross-retaliation under the TRIPS Agreement. He presents the range of legal options available to governments considering the suspension of concessions under the TRIPS Agreement particularly in terms of identifying the level of suspension and avoiding legal conflicts.
Dr. Appleton has identified and outlined options on how to implement cross- retaliation within the GATS. In this connection, he has examined Modes and sectors of service supply where cross retaliation would be legally and technically feasible while creating an incentive for the violating member to comply without causing harm to the economy of the retaliating member.
 
After the presentations, comments were made by a number of distinguished experts and delegates. An open discussion with the audience followed. (Programme attached). The two studies by Professor Abbott and Dr.  Appleton were made available at the meeting.

The International Centre for Trade and Sustainable Development will organize a panel during SIEL’s inaugural conference that will examine developing country participation in the WTO Dispute Settlement System. Through the presentation of country studies on Brazil, Chile and Egypt the panel will share developing country dispute settlement experiences and facilitate active discussions on this issue amongst participants.

ICTSD’s panel emerges from part of a greater project undertaken by the DSU programme. The three panel presentations presented at the conference come from a case study book compiled by the Centre that closely examines the DSU experience of nine developing countries in different regions throughout the world. More details on this field guide and its publishing date will be available in late 2008.

“We will. The only decision is when,” Roberto Azevedo, Brazil’s chief trade official, told journalists, according to Reuters.

The announcement comes three weeks after the WTO’s Appellate Body upheld Brasilia’s challenge to the support that the US offers its upland cotton producers. The panel ruled that the US subsidies, which include marketing loans, counter-cyclical payments and export credit guarantees, were inconsistent with the country’s WTO obligations.

Brazil had complained that the payments artificially depress global cotton prices, pushing Brazilian producers out of the market (See BRIDGES Weekly, 11 June 2008, http://www.ictsd.org/weekly/08-06-11/wtoinbrief.htm#2).

But before it can take any retaliatory measures, Brazil must re-activate its request, first submitted in 2005, for permission to take countermeasures against the US. Usually, complainant countries apply sanctions to goods from the same sector in which the dispute occurred. In this case, however, Brasilia plans to renew its request for authorisation to ‘cross-retaliate’ in other sectors. Specifically, it will ask permission to suspend intellectual property protection obligations (in copyrights, trademarks, industrial designs, patents and the protection of undisclosed information), and to suspend concessions in several services sectors.

If and when Brasilia re-commences arbitration, the WTO panel will need to rule on both the type of countermeasures that can be taken as well as the level of sanctions that can be applied. Brazil is considering making two requests, one for US$1 billion and one for US$3 billion.

However, Brazilian officials have said that it would be at least a few months before any request is submitted. The issue of retaliation is especially complex and will be considered with great care, especially as Brazil must consider the risk of US retaliation in another sector.

Meanwhile, the US has again declared its disagreement with the recent ruling of the WTO Appellate Body, saying that the decision was based on outdated evidence. Washington claims that the land devoted to cotton in the US has fallen by 38.5 percent in the last two years, that subsidies have been reduced and that marketing loans were eliminated in September 2007. Furthermore, Washington has suggested that it will not take additional measures to remove its cotton subsidies. That sentiment, coupled with the farm bill passed by the US Congress last month - which generally maintains payments to cotton producers - has led many in Brazil to denounce the Washington’s lack of goodwill on the issue.

ICTSD reporting. “Brazil to seek U.S. trade sanctions over cotton” REUTERS, 20 June 2008; “Brazil Ponders on How to Retaliate Against US Cotton,” BRAZZILMAG.COM, 22 June 2008; “Brazil to Pursue $4 Billion in Sanctions Against U.S. on Cotton” Bloomberg, 17 June 2008; “EUA não devem rever política do algodão” AGENCIA ESTADO, 20 June 2008.

The US and Canadian claims, both submitted on 9 June (WT/DS320/13; WT/DS321/13), follow an appeal filed by the EU late last month. In that claim, Brussels protested the panel’s finding that its ban on imports of hormone-treated beef was illegal. The EU also faulted the panel for stopping short of explicitly ordering Washington and Ottawa to remove the extra duties they had imposed in retaliation to the ban (WT/DS320/12 and WT/DS321/12).

In a ruling circulated in March, the panel found fault with all three parties involved in the dispute (see BRIDGES Weekly, 2 April 2008, http://www.ictsd.org/weekly/08-04-02/story1.htm).

For the EU, the panel ruled that a lack of adequate scientific risk assessment meant that the import ban on hormone-treated beef, which Brussels modified in response to an earlier panel ruling, still failed to comply with the requirements of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.

The panel further ruled that the US and Canada had not followed proper procedures in continuing their trade retaliation against the ban. Washington and Ottawa have retained over US$125 million in annual sanctions on EU exports, such as Dijon mustard and Roquefort cheese, based on their unilateral determination that the EU’s modifications to its ban were not sufficient to bring it into compliance with a 1998 WTO ruling. The panel maintained that the US and Canada should have initiated legal proceedings to determine whether the import ban still violated WTO rules in order to maintain the sanctions.

In its appeal filed last week, the US stated that the panel’s finding on that topic “is in error and is based on erroneous findings on issues of law and legal interpretations.”

For its part, Brussels welcomed the panel’s ruling that US and Canadian retaliatory tariffs breached WTO rules, but disagreed with the panel’s determination that its ban was illegal, calling the assessment “flawed.”

“The panel made legal errors when it found that the new EU hormones directive does not comply with the WTO Agreement on Sanitary and Phytosanitary Measures,” the EU appeal stated.

The dispute began more than a decade ago, when a WTO panel first ruled that the US and Canada could impose punitive tariffs on European products to retaliate against Brussels’ ban on imports of beef produced with six growth-promoting hormones that are common in the US and Canada.

ICTSD reporting; “Notification of an Other Appeal by Canada,” WWW, 16 June 2008; “Notification of an Other Appeal by the United States,” WWW, 16 June 2008; “EU appeals WTO ruling over US beef hormone ban,” EU BUSINESS, 2 June 2008; “EU appeals WTO panel ruling on US and Canadian sanctions on EU goods in hormone-treated meat dispute,” EUROPEAN COMMISSION, 29 May 2008.

The DSB’s ruling, which confirms Brazil’s view after several years of disputes and appeals, marks the first time that a developed country’s agricultural policy has been successfully challenged at the WTO.

In December, five years after Brazil first requested a consultation, a WTO panel issued a report, known as Article 21.5, upholding Brazil’s claim that the marketing loans and countercyclical payments that the US offers its cotton farmers violate both the Agreement on Subsidies and Countervailing Measures and the General Agreement on Tariffs and Trade.

The US appealed that ruling in February, maintaining that its cotton payments fall outside the scope of Article 21.5 and that they do not significantly suppress global cotton prices.

The panel, in its report last week, again sided with Brazil, rejecting the US appeal. It was convinced by Brazil’s arguments that even a small drop in prices harms Brazilian producers, given their narrow profit margins, and that US cotton producers’ ‘artificially high’ market share reflects the impact of these subsidies.

Furthermore, the Appellate Body ruling allows Brazil to retaliate by imposing more than US$1 billion worth of sanctions on US imports each year. The WTO has suggested that this could take the form of a suspension of intellectual property rights.

While the ruling will prove encouraging to developing country trade negotiators, it is far from certain that the US will terminate its cotton subsidies. Indeed, after the issuing of an interim report by the WTO last July, then-US Agriculture Secretary Mike Johanns said that his government would “work very, very hard” to maintain payments to domestic cotton producers. This stance was confirmed in the farm bill passed by the US Congress last month. That legislation offers cotton producers subsidies of US$2-4 billion for over the next five years.

ICTSD reporting. “Brazil claims WTO cotton victory,” BBC NEWS, 27 July 2007; “US loses in cotton dispute at WTO,” BBC NEWS, 2 June 2008; “US loses WTO Brazil cotton appeal,” AL JAZEERA INTERNATIONAL, 2 June 2008.

Developing country WTO Members struggle to make effective use of the WTO Dispute Settlement Understanding system due to a lack of capacity and limited resources. Without the ability to access technical assistance and legal support, these nations are at a disadvantage for successfully pursuing cases under the DSU system and ensuring compliance with DSU rulings. In response, ICTSD has invited dispute settlement and international trade policy expert, Professor Chad P. Bown of Brandeis University and the Brookings Institute to lead a roundtable discussion on the challenges developing countries face within the DSU system and possible solutions for resolving these problems. As part of ICTSD’s Cafe & Croissants series, this event will be an informal, off-the-record, lively dialogue and debate where all professionals interested in this topic are invited to participate.
WTO Members have increasingly made use of the WTO Dispute Settlement Understanding system to defend their trade and sustainable development interests since its introduction in the mid-1990s. Yet, developing country Members have struggled to effectively make use of this system. Lack of capacity and resources limits these countries’ ability to access technical assistance and legal support that is needed to successfully identify and pursue DSU cases. In response, ICTSD has organised an informal dialogue event that will examine this problem within the DSU system and offer ways it can be resolved.
The ICTSD-led event, entitled “Post-Doha Dispute Settlement and Developing Countries: Identifying and Addressing the Need for Improved Extra-Legal DSU Support,” will focus on two fundamental problems with the DSU system related to developing countries lack of capacity: first, trade disputes not initiated under the DSU; and second, the unprepared use of the DSU system. Led by Professor Chad P. Bown of Brandeis University and the Brookings Institute in the US, the dialogue will explore these problems ultimately leading to the proposition of solutions including the creation of a WTO institution that will assist developing countries in pursuing WTO enforcement.
The creation and workings of this proposed institute includes identifying where developing countries are making efforts to use DSU and what the outcomes—both successes and failures—of these cases are; working with stakeholders (NGOs, civil society, think tanks and the private sector) to reposition their skill-sets in order to take full advantage of the WTO enforcement system for economic development; and motivating the creation of a new WTO compliance monitoring institution that will bring together a network of available technical assistance that developing countries can access for help in effectively pursuing WTO enforcement.
The upcoming dialogue is part of ICTSD’s Cafe & Croissants series, which are informal, off-the-record dialogues and discussions, where visiting speakers are invited to introduce a timely issue that sits at the intersection of trade and sustainable development. Here, Professor Brown, an Associate Professor in the Department of Economics and the International Business School at Brandeis University and a non-resident fellow at the Brookings Institute, has been invited to lead the roundtable on the DSU system.
Organised for Wednesday 5 June 2008 in Geneva, Switzerland across from ICTSD’s offices in the International Environment House I, the event is open to all interested parties. ICTSD encourages a broad range of international stakeholders interested in these issues to participate and to engage actively in discussions, thereby enabling fruitful, innovative and lively dialogues to take place. Those interested in attending should contact Sheila Sabune at ssabune@ictsd.ch or Simon Jon Tans at stans@ictsd.ch or by fax at (+41) 22 917 80 93 to RSVP and for further information. Seating is limited.

The official complaint centres on three products: cable or satellite boxes with internet capability; flat panel displays for computers; and computer printers that also have the capacity to scan, copy or fax.

Washington and Tokyo claim that these products should be duty free under the WTO’s Information Technology Agreement (ITA), which prohibits tariffs on high-tech products among the agreement’s signatories.

But Brussels maintains that the ITA does not apply when technology changes have given a product multiple functions. For example, from the EU perspective, cable boxes with internet capability should properly be classified as video recorders because they can record live television, and thus should fall outside the scope of the ITA.

According to a statement by the European Commission “both the spirit and explicit provisions in the ITA make it clear that extension to new products to reflect technological change would not be automatic, but based on periodic review by signatories.”

Indeed, Brussels has on several occasions called for a renegotiation of the ITA, but the US has objected, arguing that technological developments of the products covered by the agreement were foreseeable and that new products should therefore be automatically included under its rules.

Global exports of the products targeted in the complaint amounted to an estimated US$70 billion in 2007. US Trade Representative Susan Schwab has said that EU duties reach 14 percent on some items.

Under WTO rules, the countries involved will now engage in consultations for 60 days. If no resolution has been reached at the end of that period, the US and Japan can ask a WTO panel to determine whether the EU is meeting its trade obligations.

ICTSD reporting; “EU-US trade row erupts over IT products,” EURACTIV, 30 May 2008; “U.S. files WTO case vs EU over tech tariffs,” REUTERS, 28 May 2008; “Remarks by Ambassador Susan Schwab United States Trade Representative,” 28 May, 2008; “EU rejects claims over technology tariffs,” EUROPEAN COMMISSION TRADE ISSUES, 28 May, 2008.

Since its entry into the WTO, China placed a strong emphasis on not only increasing trade opportunities, but also on using the dispute settlement system (DSU) in the WTO to help establish more stable and predictable trade relations with its partners. Yet, developing countries—including major members such as China and Brazil—struggle to capitalise on DSU because of its complexity and intense resource-demands. In response, ICTSD and the China Society for WTO Development Studies have organised a dialogue event to examine the DSU structure, identify major challenges faced by developing country members, and draw on lessons from case studies. The dialogue will aim to use these shared experiences to identify new strategies for strengthening DSU and developing countries’ benefit from the system.

Since its entry into the WTO, China’s trade has grown rapidly, making it the world’s third largest trader today. Upon acquiring WTO membership, China placed a strong emphasis on the Dispute Settlement Understanding (DSU) system and hoped that this rules-based multilateral scheme could help the nation establish more stable and predictable trade relations with its partners as it grew. Given the enormity of China’s current trading, how the country participates in DSU will have important implications not only on its own trading partners, but the system itself.

Yet, unfortunately, the legalised mechanism of dispute settlement in the WTO is complex and resource-demanding, raising concerns about the capacity and ability of developing countries to effectively utilise the system to safeguard their trading rights and secure their development objectives. Developing country WTO Members thus need to make cost-effective adjustments if they are to gain from DSU.

In response, ICTSD and the China Society for WTO Development Studies have jointly organised a Beijing—based dialogue to focus on strengthening developing countries’ understanding of the options and potential strategies for advancing their trade objectives and defending their trade rights through the DSU system.

To identify strategies for improving developing countries’ ability to capitalise on DSU and global trading systems, the dialogue will focus on sharing dispute settlement experiences with specific attention on major developing countries like China, Brazil and India. Participants will examine the structure of DSU as it relates to these countries and draw on lessons from case studies. They will also undertake a thorough analysis of the major legal, financial, institutional and technical resource challenges faced by developing countries. Finally, the event will consider the reforms proposed as part of the review of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes and the larger Doha development round of trade negotiations.

Through these exercises, the dialogue will aim to identify and explore new strategies that promote inter-governmental and private-public coordination and cooperation. It is hoped that a list of recommendations and future strategies aimed at improving the multilateral trading system and strengthening developing countries’ capacities to capitalise on DSU will be established at the dialogue’s conclusion. This will then be distributed among policy makers, negotiators, governments and other key stakeholders.

Like many of ICTSD’s dialogues, the event will be held in an informal setting that encourages active and open participation from all attendees. To help support this, simultaneous translations in English and Chinese will be provided.

Along with ICTSD and the China Society for WTO Studies, the event is being organized in collaboration with the WTO Studies School of Wuhan University and the Shanghai WTO Affairs Consultation Centre. The organizers are expecting the attendance of around fifty participants made up of international and Chinese experts representing a broad range of stakeholders including negotiators, government representatives, international governmental organisations, academics, legal practitioners, think-tanks, civil society bodies, and private industry.

The event is scheduled for 9-10 July 2008 at the Holiday Inn Chang Ann West Beijing, China.

Chinese Version