In a dispute that’s been going on for years now, Brazil is preparing to levy tariffs on 102 different U.S. goods in retaliation for the U.S.’s refusal to comply with a WTO cotton subsidies decision back in 2005. The WTO permitted Brazil to impose the sanctions, which will amount to about $830 million, in light of the U.S.’s resistance to removing illegal cotton subsidies.
This whole kerfuffle has certainly made me look stupid, as I wrote a 2006 thesis examining the political reasons why the United States complied with the original ruling. Although the U.S. did remove certain subsidies, it left others intact. It’s those leftover subsidies that continue to bother Brazil.
As I’ve mentioned before, this kind of countermeasure is interesting because it is perhaps the only form of pure “retaliation” sanctioned under international law that gets a stamp of pre-approval. (The countermeasures rationale does, however, often serve as a post hoc justification for an act that would otherwise violate international law.).
I got abnormally excited when I saw Susan’s post about the Brazillian cotton case, as it relates to both my undergraduate thesis and my student note. So, I felt the need to note a few quick things for the fellow WTO nerds out there.
Brazil can’t get countermeasures when the U.S. has already complied. My undergraduate thesis tried to determine why the United States (seemingly against its own interests) complied with a WTO decision ruling U.S. “Step 2″ cotton subsidies illegal. So, I was surprised to see that Brazil recently sought countermeasures from the U.S. because they didn’t comply with the Step 2 decision. Huh? Was my thesis all wrong?! As it turns out, Brazil admitted that the U.S. repealed the Step 2 program a few years ago. Nevertheless, they tried to ignore one of the basic principles of WTO law: there’s no such thing as retroactive countermeasures. Essentially, Brazil argued that the U.S. did not repeal its Step 2 program fast enough and should be punished. But the arbitrators reminded Brazil that countermeasures are meant to induce compliance, not punish others. Since the U.S. had already complied (even though it was tardy compliance), Brazil couldn’t be awarded any goodies.
Brazil can probably force the United States to cough up GSM-102 numbers. Susan asked what sort of powers Brazil has to make the U.S. cough up numbers about its export subsidies. I’m guessing its powers are substantial, as the WTO arbitrator specifically included in its report a demand that the U.S. provide such figures:
The United States shall provide the most recent fiscal year data on GSM 102 transactions. The data on GSM 102 transactions by commodity and by obligor shall be supplied in the exact format (and software) as Exhibit US-78. Should the United States not be able to provide the most recent fiscal year data on GSM 102 transactions, Brazil shall use the data from the last available fiscal year.
I’m not aware of any specific sanction for failing to comply with a WTO arbitrator’s decision. Article 25.4 of the DSU says that Articles 21 and 22 (which are the important sections about compliance) apply mutatis mutandis to arbitration. Maybe this means that you can impose sanctions when a member doesn’t comply with an arbitrator’s demand? Nevertheless, I am sure that the WTO (as a body) would take action if the U.S. does not fork over the numbers requested by Brazil.
TRIPS-based sanctions remain a secondary remedy, but it’s not taboo. Although my student law review advocates note otherwise, the cotton decision emphasized that countries cannot simply jump straight to TRIPS-suspension whenever a country fails to comply with a WTO decision. TRIPS is the WTO’s intellectual property agreement; allowing a country to suspend that agreement essentially permits legal piracy (pirated copies of I Know Who Killed Me for everyone!) Although legal piracy sounds like the ulitmate punishment, you can’t engage in legal piracy anytime there’s an argument over grapes or cotton or undershirts.
The Export Administration Regulations (“EAR”) prohibit U.S. persons from cooperating in any boycotts of foreign states that the U.S. does not support. The primary purpose of these regs is to attack the Arab League’s boycott of Israel.
The Jerusalem Post recently came out with an article showing that, despite these antiboycott provisions, attempts by Saudi Arabia to gain compliance from American businesses with it boycott activities are on the rise.
A review of US Commerce Department data conducted by the Post found that the number of boycott-related and restrictive trade-practice requests received by American companies from Saudi Arabia has increased in each of the past two years, rising from 42 in 2006 to 65 in 2007 to 74 in 2008, signifying a jump of more than 76 percent.
In addition to being a violation of domestic U.S. law by American businesses, this is also pretty clearly a violation of Saudi Arabia’s commitments to the WTO:
In November 2005, the desert kingdom pledged to abandon the boycott after Washington conditioned Saudi Arabia’s entry into the World Trade Organization on such a move. A month later, on December 11, Saudi Arabia was granted WTO membership.
The WTO, which aims to promote free trade, prohibits members from engaging in discriminatory practices such as boycotts or embargoes.
It looks like the Jerusalem Post article might be spurring Congressional action:
[Democrat and Chairman of the House Foreign Affairs Committee Howard] Berman declared that he would take action on the issue.
“I intend to pursue this matter with the administration,” he said.
Across the aisle, Congressman Mike Pence of Indiana, who chairs the House Republican Conference, also criticized Riyadh for its duplicity.
“Saudi Arabia’s disregard of its 2005 pledge to end the boycott against Israel is unacceptable,” Pence told the Post.
“Congress and the administration must hold Saudi Arabia accountable. The United States cannot stand by and continue to witness this mistreatment towards the peace-loving people of Israel,” he said.
Over at International Trade Law News, there’s a graph up showing boycott activity among Arab League nations in 2008. Saudi Arabia ranked fifth among boycott requests, while Jordan remained alone in having no reported boycott activity.
China is appealing the recent WTO decision that came down against them recently, ruling that they can’t force U.S. media producers to go through Chinese state-run enterprises. Interesting, China is citing the “public morals” exception that has only been cited in one other case: Antigua’s claim against the U.S.’s disallowance of online gambling. It was a tough defense for the United States; and it’s sure to be a tough one for China as well.
(I’m primarily interested in this defense because the U.S.–Gambling case spurred by student note. So, humor me.)