Trading Punches
INTRODUCTION
Protests outside the World Trade Organization's meeting in September were more restrained than usual.
But on the inside, trade officials were as busy as ever.
The latest round of global trade talks, held in Cancun, Mexico, collapsed amid deep differences between
rich and poor nations over farm subsidies and investment rules, just two of the myriad disputes WTO
arbiters are grappling with at their Geneva-based headquarters. The U.S., as the world's largest
economy and trading power, is often at the center of such cases.
When disputes are brought before the WTO, a governing council determines whether a country's trade
policies conform to global rules. Resolutions, which almost always are handled by consensus, usually
involve granting or reproving the imposition of tariffs.
Since the WTO's founding in 1995, 301 formal disputes have been filed by member nations. Of those,
more than half involve the U.S. as either a complainant or a respondent. Here's a look at some of the
latest trade disputes involving the U.S., what's at stake, and where the cases stand.
-- Jim Chairusmi, Deborah Creighton, Naureen Malik, Brian McCallister and Leslie Shaffer
SOFTWOOD LUMBER
The Dispute: The U.S. in May 2002 imposed permanent import duties of 27.2% on Canadian softwood
lumber. The move came after a North American Free Trade Agreement panel ruled that U.S. timber markets
were threatened by illegal Canadian dumping of home-construction wood at below-market prices. Canada
took the issue to the WTO.
At Stake: Canada sells about $6 billion of spruce, pine and other softwood lumber to the U.S. Analysts
projected at the time that higher prices from the tariff could cost U.S. consumers as much as $2 billion a
year.
Status: In a mixed ruling earlier this year, the WTO sided with the U.S., saying logging fees set by Canadian
provincial governments indeed constituted a "financial contribution" to the Canadian lumber industry.
However, the panel also urged Washington to change how it calculated its retaliatory duties to conform with
international law. Both countries claimed victory, although the U.S. may appeal pending a review of the
decision.
Further reading:
• Canada Claim Victories in Wood Row (Sept. 1, 2003)
• WTO Decides Against U.S. in Lumber Spat (May 28, 2003)
• U.S. Plans High Duties on Canadian Softwood (March 22, 2002)
WHEAT
The Dispute: In March, the WTO formed a panel to investigate U.S. claims that Canada is dumping wheat
and durum, a type of wheat used for making pasta. The trading body also is investigating whether Canada
unfairly subsidizes the Canadian Wheat Board, a farmer-controlled group that controls wheat exports from
Canada's western provinces.
At Stake: The Canadian Wheat Board sells about $281.9 million of grain in the U.S. each year. The wheat
row erupted in October 2002 when the North Dakota Wheat Commission, which produces 48% of U.S.
spring wheat and 67% of U.S. durum wheat, petitioned Washington to launch investigations of the Canadian
Wheat Board.
Status: The U.S. in May imposed preliminary duties averaging about 7% on some types of Canadian wheat.
The U.S. International Trade Commission has threatened to set tariffs as high as 14% by mid-October. The
WTO is expected to rule on the matter by early next year.
Further reading:
• U.S. Adds Penalty Tariffs on Some Canadian Wheat (May 4, 2003)
• U.S. Appeals to WTO Panel on Canadian Wheat Dispute (March 7, 2003)
• Trade Dispute Erupts Over Sales of Wheat (Oct. 1, 2002)
BEEF & RICE
The Dispute: The U.S. filed a complaint with the WTO in June over Mexico's antidumping orders on U.S.
beef in 1999 and white long-grain rice in 2002. This isn't the first food fight between the neighbors; past
spats have included high-fructose corn syrup and swine. In 1999, Mexico slapped steep, preliminary tariffs
of as much as 215% on U.S. beef, saying it was sold at an artificially low price.
At Stake: Since the North American Free Trade Agreement was created, Mexico has become the thirdlargest market for U.S. food and agricultural products. The U.S. exported $829 million of beef products and
$103 million of rice to Mexico in 2002. Mexico says new Nafta rules have placed its food industry
dangerously close to collapse.
Status: The two countries have reach past agreements on allowing limited quotas of U.S. food across the
border duty free before tariffs take effect. After the U.S. challenged corn syrup and swine antidumping
orders, Mexico backed down. A decision on the beef tariffs is expected soon, and could head before a WTO
panel if it isn't resolved.
Further reading:
• U.S. Takes Mexico to Task Over Beef, Rice Tariffs (June 16, 2003)
• Mexico Unveils Fat Tariffs on U.S. Beef (Aug. 3, 1999) ORANGE
JUICE
The Dispute: The U.S. and Brazil, at odds over an almost 29-cent-per-pound tariff on frozen orange-juice
concentrate, are focusing their fight in Florida. Brazil is awaiting final ruling on a WTO complaint it filed over
Florida's three-cents a gallon tax on juice. Brazil says the tax is illegal because it isn't applied to juice
produced in the state.
At Stake: Together, Brazil and Florida produce about 90% of the world's orange juice. Florida's citrus
industry currently generates about $9 billion in revenue.
Status: Brazil filed its complaint in October 2002, and rulings typically take about at a year. Judith GanesChase, president of J. Ganes Consulting, says the fight continues despite plummeting demand in the
orange-juice market. Brazil says it won't sign any Free Trade of the Americas accord that doesn't open up
U.S. markets. The U.S. Department of Agriculture says that such access would have a devastating effect on
the U.S. citrus industry.
Further reading:
• Brazil Urges Trade-Bloc Unification (June 28, 2003)
• Orange Juice Rivalry Spurs Florida Plan to Spy on Brazil (Jan. 28, 2003)
• Free-Trade Discord Looms for Americas (Dec. 31, 2002)
DRUG PATENTS
The Dispute: The U.S. is involved in a long-running dispute with Argentina and Brazil over the failure to
provide patent protection for American products, particularly pharmaceuticals. The two South American
nations argue that relaxed patent regulations are needed in order to produce less costly drugs to combat
killer diseases.
At Stake: U.S. drug researchers insist they need world-wide patent protection to recoup the millions spent
on research and development of these drugs. Merck spokeswomen Anita Larsen says patent protections
have to be balanced with health-care needs world-wide, or else there would be little incentive for companies
to develop crucial drugs.
Status: The WTO recently won a breakthrough to allow poor countries access to drugs, but the issue
resurfaced at trade talks in Cancun earlier this month. The Bush administration, pressured by the
pharmaceutical industry, opposes the WTO accord. Other compromises to provide less costly drugs to the
poorest nations are in the works, but a definitive, multilateral accord has proved elusive.
Further reading:
• WTO Fails to Agree on Drug-Patent Deal (Aug. 29, 2003)
• Drug Talks Show Poor Nations Are Wielding More Clout at WTO (Aug. 29, 2003)
• U.S. Reaches Patent Compromise to Provide Drugs to Poor Nations (Aug. 28, 2003)
STEEL
The Dispute: The dispute between the U.S. and the EU over steel predates the creation of the WTO. In
2002, the U.S. imposed safeguard duties of as much as 30% on steel products from the EU and other
countries, arguing the WTO allowed such measures for up to three years to protect an industry from a flood
of cheap imports. The tariffs now top out at 24%.
At Stake: By the end of last year, the value of steel imported in the U.S. was about $1 billion, according to
the Commerce Department. Steelmakers say the tariffs have helped revitalize a near-bankrupt industry, but
that it is too soon to remove the duties. The EU is prepared to impose $2.2 billion in retaliatory duties on
U.S. steel products.
Status: The WTO ruled in July that Washington failed to prove its measures were necessary because of
"unseen developments" in the world steel market. A U.S. appeal made last month isn't expected to prevail,
meaning the Bush administration may soon have to decide whether to follow the WTO ruling, or slash tariffs
and risk political backlash from steel-producing states. Two bulky reports from the U.S. International Trade
Commission offered little mandate to either continue or end the tariffs.
Further reading:
• Dueling Steel-Tariff Reports Afford Bush Little Mandate (Sept. 21, 2003)
• U.S. Steel Tariffs Likely to Stay (March 31, 2003)
• WTO Says U.S. Tariffs Violate Rules (March 27, 2003)
GENETICALLY MODIFIED ORGANISMS
The Dispute: The U.S. and EU are trapped in a protracted dispute over genetically modified organisms, or
foods. The EU says it plans to introduce new rules this autumn that require all bioengineered foods to have
clear labeling and an independent risk assessment -- rules it says are within WTO guidelines. But U.S. corn
and soybean farmers claim the rules amount to a de facto ban on GMO. The EU itself is divided, recently
waging battle in court over whether member states have the right to block shipments at their ports.
At Stake: The International Service for Acquisition of Agri-Biotech Applications predicts the global market for
biotech crops will reach $5 billion in 2005, up from $3.5 billion in 2002. The EU ranks as the largest market
for U.S. soy products, estimated at $1.1 billion. U.S. farmers believe the new EU rules will cost too much
and unnecessarily frighten consumers by suggesting a health risk that doesn't exist, costing them nearly
$300 million a year in lost corn exports. U.S. exports of soybeans to Europe, meanwhile, have declined by
half to about $1 billion since 1998.
Status: Last spring, the U.S. elevated the GMO dispute to the highest level, filing a formal complaint in the
WTO. That case, which could last at least another year, may well be overtaken by the new EU biotech rules.
U.S. farmers already are leaning on the Bush administration to launch a new WTO complaint when they
become effective.
Further reading:
• EU Court Upholds Italy's Ban On Genetically Modified Corn (Sept. 10, 2003)
• U.S. Requests WTO Panel in EU Biotech-Food Case (Aug. 8, 2003)
• U.S., EU Battle Rages Over Modified Crops (July 15, 2003)
U.S. ANTIDUMPING ACT OF 1916
The Dispute: Japan in 1999 challenged this rarely used U.S. law that allows U.S. companies to seek civil
and criminal penalties against foreign companies' U.S.-based subsidiaries that allegedly dump underpriced.
The EU previously had asked the U.S. for consultations on the matter.
At Stake: The rarely used law was seen as a faster workaround to the Tariff Act of 1930, which companies
normally rely on for protection against allegedly unfairly cheap imports. When a Wheeling-Pittsburgh Steel
unit sued several Japanese companies and Germany's Preussag over cheap steel in 1998, they resurrected
the antidumping act. That case led to a settlement with a number of steel importers. Japan says the law
limits the sale of foreign goods on U.S. soil.
Status: The WTO established a dispute panel in February 1999, and in June 2000 ruled against the 87year-old U.S. antidumping law. Last month, the U.S. said it will continue to work on overhauling the
legislation in Congress while conferring with Japan and the EU.
Further reading:
• EU Chips Away at Steel Protections (June 9, 2001)
• WTO Panel Rules Against U.S. in Decades-Old Antidumping Law (June 7, 2000)
DRAM CHIPS
The Dispute: The U.S., along with the EU, has imposed hefty import duties on Dynamic Random Access
Memory chips from South Korea's Hynix Semiconductor after ruling the South Korean government had
unfairly subsidized the chip maker. The complaint process began last year after rivals Micron Technology of
the U.S. and Infineon Technologies of Germany protested that subsidies allowed South Korean firms to
undercut global chip prices.
At Stake: Analysts at research firm Gartner Inc. said revenue from the global DRAM market is projected to
reach $18.9 billion in 2003, and DRAM chips represent South Korea's largest export item. The country
exported $5.97 billion of DRAM chips last year, with shipments to the U.S. totaling $1.94 billion.
Status: The South Korean government has filed a formal appeal on the tariffs to the World Trade
Organization. Analysts say Hynix has been circumventing much of the tariffs by going through its U.S. plant,
and by shipping to countries outside the U.S. and EU.
Further reading:
• South Korea Files Complaint Against EU Over Chip Duty (Aug. 25, 2003)
• EU Imposes 34.8% Tariff on Hynix Memory Chips (Aug. 12, 2003)
• U.S. Says Korean Subsidies on Chip Exports Were Unfair (June 16, 2003)
CATFISH FILLETS
The Dispute: Mississippi fish producers filed suit in 2000 arguing that Vietnam unfairly captured 20% of the
catfish-fillet market by undercutting prices. The U.S. in July imposed crippling tariffs ranging from 37% to
64% on Vietnamese frozen catfish fillets after the U.S. International Trade Commission found Vietnam
illegally dumped catfish.
At Stake: Before the trade fight erupted, Vietnam had sent about a third of its catfish exports to the U.S. In
2000, the price of catfish per pound was 74 cents. The U.S. catfish industry, concentrated in the South, is
estimated at about $590 million. There are more than 190,000 acres of catfish ponds in the U.S., with
110,000 in Mississippi alone.
Status: Vietnam isn't expected to join the WTO until at least 2005, which gives it scant recourse. Vietnam
plans to appeal the ruling with the ITC, but the country doesn't expect the commission to reverse its
decision.
Further reading:
• Reality Falls on Vietnam Trade Pact (July 23, 2003)
• Ruling Says Vietnam Dumps Catfish (Jan. 27, 2003)
• Vietnam Warns U.S. Over Catfish (Jan. 23, 2003)
FOOD AID
The Dispute: The U.S. every year delivers millions of tons of food to aid stricken countries such as Ethiopia;
most is purchased from U.S. farmers. Rival exporters such as the EU and Australia argue Washington uses
food aid to dump surplus commodities, in effect subsidizing U.S. growers and depressing commodity prices.
The EU altered its food-aid policy in 1996, switching to donating cash to buy as much food as possible in a
stricken country or region. Some food-aid recipients in Africa, meanwhile, say the U.S. subsidies quash the
domestic and export market for home-grown produce.
At Stake: Federal subsidies protect U.S. farmers from unprofitable prices and substantial income losses even as they produce twice as much wheat as the country needs. Farmers in poor countries, meanwhile,
struggle to sell their own produce after local communities become stocked with food aid. Agricultural
subsidies total about $300 billion annually, according to the Organization for Economic Cooperation and
Development.
Status: WTO talks in September failed to reach a global agreement on farm subsidies. The Bush
administration agreed to consider how to impose "disciplines" on American food aid, but Washington shows
little sign of agreeing to any significant changes.
Further reading:
• Africa Seeks Compensation for Cost of Cotton Subsidies (June 10, 2003)
• Africa Could Feed Itself, but Many Ask: Should It? (Dec. 3, 2002)
• Addiction to Sugar Subsidies Chokes Poor Nations' Exports (Sept. 16, 2002)
THE BYRD AMENDMENT
The Dispute: Congress in 2000 passed the Continued Dumping and Subsidy Offset Act - the so-called Byrd
Amendment -- which calls for import duties to be passed on to U.S. manufacturers allegedly hurt by unfair
foreign competition. The law, which amounts to foreign companies paying their American competitors for the
right to sell products in the U.S., immediately drew the ire of WTO members.
At Stake: Congressional forecasters figured the Byrd Amendment would dole out $39 million a year. But
U.S. companies have collected a windfall of more than $550 million in antidumping duties so far.
Status: The WTO found in September 2002 that the amendment, acting as an unfair subsidy, violated
global trade rules. The Bush administration in February urged Congress to repeal the law, and included a
measure in the 2004 budget that would kill the rule at the end of the fiscal year. But the law still enjoys
strong support in Congress.
Further reading:
• Bush Seeks an End to Duty Payments (Feb. 4, 2003)
• Firms Pocket Windfalls From Tariff Law (Dec. 5, 2002)
• WTO Rules U.S. Violated Trade Pacts (Sept. 16, 2002)
COTTON
The Dispute: The U.S. and the EU reached a compromise ahead of the Cancun meeting to reduce farm
subsidies and tariffs, a major roadblock to further trade talks with African nations. The debate over cotton
has become a focal point for those who argue that subsidies in developing countries wreak havoc on local
villages in poor countries. At the recent WTO meeting, delegates from four West African nations pleaded for
an end to all cotton subsides, and for $250 million in direct compensation to get farmers back on their feet.
At Stake: Cotton represents about 40% of the world fabric market, and world-wide textile and apparel
exports amounted to $342 billion in 2001, according to the WTO. The U.S. spends around $2.5 billion a year
and the EU an additional $700 million helping their cotton farmers, which many say has helped depress
cotton prices to historic lows.
Status: The WTO talks collapsed over an impasse in eliminating overall agricultural subsidies. A draft
resolution at the meeting backed a U.S. proposal to make cotton part of continuing negotiations regarding
textiles, but to offer no immediate relief.
Further reading:
• U.S. Farm Sector Shows Signs of Reviving After Lean Years (June 16, 2003)
• France, Germany Deal Blow to EU Agricultural Reform (June 13, 2003)
• Africa Seeks Compensation for Cost of Cotton Subsidies (June 10, 2003)