International Explainers: World Trade Organisation (WTO) Part 2 – Trading Disputes

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Having previously explained the workings of the WTO, International Explainers this week examines some of the trading dispute cases brought to the WTO.

Since the WTO’s formation in 1995, more than 500 trading disputes between countries, or territories, or the trading bloc of the EU, have occurred. The WTO’s Dispute Settlement Body (DSB) manages such disputes when a party feels that another party is unjustly discriminating against it, or is generally breaching agreed international trading rules. Those selected below look to reflect the diverse range and outcomes of the disputes the WTO handles.

DS381 – Complainant: Mexico; Respondent: USA; Topic: Tuna importation and ‘dolphin-safe’ labels’

The WTO’s dispute settlement mechanism can take time to resolve issues, as in this case, where Mexico’s original filing of this specific complaint was a decade ago and the dispute’s origins date back to before the WTO’s formation.

The crux of the matter is Mexico’s objection to the certification standards for ‘dolphin-safe’ labelling on tuna products, where US regulators certify that the fishing methods used keep dolphin deaths to a minimum. Previously, Mexico’s fishing industry was heavily criticised for the way it caught tuna with large purse seine nets used underneath dolphins. Following international pressure, Mexico introduced more stringent standards, including the presence of observers on ships to record each tuna catch. Despite Mexico’s claim that the measures cut dolphin deaths to below US fisheries threshold limits, and that tuna caught from other regions only requires the mere self-certification of no harm to dolphins in the process by the ship’s captain, the US has deemed Mexico’s measures as insufficient for the label ‘dolphin-safe’.

In 2008, Mexico launched dispute settlement case 381, requesting ‘consultations’ with the US; the first stage in the dispute settlement process. The establishment of a panel to assess the claims of the US’s inconsistent ‘dolphin-safe’ certification standards was requested by Mexico the following year, and in September 2011, the panel’s report broadly agreed with Mexico’s viewpoint. Following further proceedings, the US appeared set to comply with the panel’s ruling, and both countries agreed they should have a 13 month period to implement the changes required. However, in November 2013, 5 months after the US had notified of its implementation of procedures to comply with the WTO’s findings of discrimination, Mexico requested a compliance panel be established to examine whether they really had complied satisfactorily.

There followed yet more appeals and protracted panel composition. Eventually, the arbitrator ruled in April 2017 that the US’s prolonged discrimination in labelling certification standards had cost the Mexican fishing industry $163 million and the following month, Mexico successfully proposed suspending tariff concessions and other obligations to compensate for this.

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However, another twist in the tale of DS381 was still to occur. In October 2017, a WTO panel report ruling on a concurrent appeal by the US, claiming that its 2016 Tuna Measure had brought it into line with international trading rules, was published. This time, the ruling favoured the US, erasing Mexico’s right to take retaliatory trading restriction measures. Mexico has vowed to appeal, underlining how if two sides are entrenched in their views on a trading dispute, one appeal can very easily beget another, and another and another…

DS525 – Complainant: Russia; Respondent: Ukraine; Topic: Trade in goods and services’

Sometimes trading disputes brought to the WTO reflect general antagonism between two countries. Recent tit-for-tat complaint proceedings by Russia and Ukraine in the wake of the Crimean Crisis and Russian separatism in parts of Eastern Ukraine clearly fit this category. After Ukraine’s complaint in September 2016 about traffic in transit, travelling from Ukraine through Russia to third countries, Russia responded with this complaint in May 2017, asserting that:

Since 2014 Ukraine has adopted a universe of restrictions, prohibitions, requirements and procedures the effect of which is discrimination of persons, goods and services of the Russian Federation and drastic restriction of bilateral trade as well as transit

Ukraine have since retaliated, complaining of unfair treatment of a number of products, including restrictions on Ukrainian confectionery, a subject close to the heart of Ukrainian President Petro Poroshenko (pictured below). Meanwhile, in January 2018, the EU complained of restrictions imposed by Russia on the importation of pork and live pigs – perhaps fuelled by the EU’s imposition of sanctions on Russia due to its role in the Ukraine Crisis.

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DS529 – Complainant: Indonesia; Respondent: Australia; Topic: Anti-dumping measures on A4 Copy Paper’

‘Dumping’ occurs where goods are exported at prices deliberately far lower than the market they’re entered into. Because of the harmful economic effects of dumping, countries have leeway to carry out anti-dumping measures. However, perceived offending countries naturally defend their own industries from any restrictions as much as possible.

This is the case with Indonesia’s raising to the WTO of complaints against anti-dumping measures applied by Australia in relation to A4 Copy Paper from Indonesia. 60 days have passed since Indonesia’s original request for consultations, meaning that the WTO must adjudicate.

DS524 – Complainant: Mexico; Respondent: Costa Rica; Topic: Fresh Avocados’

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A variety of products can appear in trade disputes. In DS524, Mexico initiated proceedings against Costa Rica for banning the importation of Mexico’s Haas avocados in 2015. Costa Rica has always maintained the ban was made on health grounds, to preserve the quality of Costa Rican-produced avocadoes from Sunspot Disease. However, Mexico views the measures as discriminatory, and attempting to rig the market in favour of Costa Rican producers.

It appears that this dispute was resolved during consultation proceedings as the Costa Rican government offered as a compromise in November 2017 the permitted importation of Mexican avocados that are guaranteed to have no Sunspot Disease. Happy days for Costa Rican avocado lovers!

A future dispute for the WTO to adjudicate?

Trump’s implementation of the protectionist rhetoric of ‘America First’ in practice recently led to tariff impositions on imported washing machines and solar panels. Particularly affected by these measures are South Korea and China, who have already expressed their opposition. This could develop into a future dispute which the WTO is required to manage.

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International Editor 2017/18. Second year Modern History and Politics student from Bedford. Interested in British and International Politics, and Sport, particularly Rugby Union. Drinks far too much tea for his own good

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