World Trade Organization: U.S. Experience to Date in Dispute Settlement
System (Briefing Report, 06/14/2000, GAO/NSIAD/OGC-00-196BR).

Pursuant to a congressional request, GAO provided information on the
World Trade Organization's (WTO) dispute settlement system, focusing on:
(1) how WTO members have used the new system, primarily on cases
involving the United States; and (2) the impact of these cases on
foreign trade practices and U.S. laws and regulations, and their overall
commercial effects.

GAO noted that: (1) WTO member countries have actively used the WTO
dispute settlement system during its first 5 years, filing 187
complaints as of April 2000; (2) the United States and the European
Union were the most active participants, both as plaintiffs and
defendants; (3) in the 42 cases involving the United States that had
either reached a final WTO decision or were resolved without a ruling,
GAO found that the United States has served as plaintiff in 25 cases and
defendant in 17 cases; (4) as a plaintiff, the United States prevailed
in a final WTO dispute settlement ruling in 13 cases, resolved the
dispute without a ruling in 10 cases, and did not prevail in 2 cases;
(5) as a defendant, the United States prevailed in 1 case, resolved the
dispute without a hearing in 10 cases, and lost in 6 cases; (6) overall,
GAO's analysis shows that the United States has gained more than it has
lost in the WTO dispute system to date; (7) WTO cases have resulted in a
substantial number of changes in foreign trade practices, while their
effect on U.S. laws and regulations has been minimal; (8) in about
three-quarters of the 25 cases filed by the United States, other WTO
members agreed to change their practices, in some instances offering
commercial benefits to the United States; (9) for example, in response
to a 1998 WTO ruling on Japanese distilled liquor taxes, Japan
accelerated its tariff elimination and reduced discriminatory taxes on
competing alcohol imports; (10) the year following the resolution of the
case, U.S. exports of whiskey to Japan, one of the largest U.S. markets
for distilled spirits, increased by 18 percent, or $10 million; (11) as
for the United States, in 5 of the 17 cases in which it was a defendant,
two U.S. laws, two U.S. regulations, and one set of U.S. guidelines were
changed or subject to change; (12) these changes have been relatively
minor to date and the majority of them have had limited or no commercial
consequences for the United States; and (13) for example, in one case
challenging increased U.S. duties on Korean semiconductor imports, the
United States took action to comply with the WTO ruling while still
maintaining the duties.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD/OGC-00-196BR
     TITLE:  World Trade Organization: U.S. Experience to Date in
	     Dispute Settlement System
      DATE:  06/14/2000
   SUBJECT:  International organizations
	     International trade regulation
	     Foreign trade agreements
	     Dispute settlement
	     International relations
	     Foreign trade policies
	     Tariffs
IDENTIFIER:  WTO Dispute Settlement System
	     General Agreement on Tariffs and Trade
	     European Union
	     Japan
	     Korea

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GAO/NSIAD/OGC-00-196BR

Briefing Section I: WTO Members' Use of Dispute Settlement
System

8

Briefing Section II: WTO Dispute Settlement Cases Involving the
United States

12

Appendix I: Commercial Consequences in 42 WTO Dispute
Settlement Cases Involving the United States

30

Appendix II: Objectives, Scope, and Methodology

34

Appendix III: GAO Contact and Staff Acknowledgments

36

Table 1: Breakdown of 14 Cases the United States Filed, With
Commercial Benefits 30

Table 2: Breakdown of Nine Cases the United States Filed, With
Limited Commercial Effects 31

Table 3: Commercial Stakes and Outcome of 11 Cases Resolved
Without a Ruling, or Where United States Prevailed 32

Table 4: Commercial Effects of Six Cases Where the United States
Did Not Prevail 33

DRAM Dynamic Random Access Memory

EPA Environmental Protection Agency

EU European Union

WTO World Trade Organization

National Security and
International Affairs Division

B-285559

June 14, 2000

The Honorable Bill Archer
Chairman, Committee on Ways and Means
House of Representatives

Dear Mr. Chairman:

The World Trade Organization (WTO) provides the institutional framework for
the multilateral trading system. Established on January 1, 1995, as a result
of the Uruguay Round of international trade negotiations, the WTO
administers rules for international trade and provides a forum for
conducting trade negotiations. For the first time, the 1994 Uruguay Round
agreements brought agriculture and services under the discipline of
multilateral trade rules, as well as intellectual property rights and
trade-related investment. In addition, the Uruguay Round agreements
established a new dispute settlement system, replacing that under the
General Agreement on Tariffs and Trade, the predecessor to the WTO.

The WTO dispute settlement system provides a multilateral forum for
resolving trade disputes among WTO members and operates through four major
phases: consultation, panel review, appellate body review (when parties
appeal the panel ruling), and implementation of the ruling. The new system
has several important features. It discourages stalemate by not allowing
losing parties to block decisions; sets firm timetables for completing
litigation of cases; and establishes a standing appellate body, which helps
make the dispute settlement process more stable and predictable. Finally,
should a WTO member decide not to fully comply with a WTO dispute settlement
ruling, the system allows that party to accept retaliation or provide
compensation as alternatives. While the new dispute settlement system
facilitates the resolution of specific trade disputes, it also serves as a
vehicle for upholding trade rules and preserving the rights and obligations
of WTO members under the WTO agreements. Finally, the system clarifies the
provisions of specific WTO agreements and provides a climate of greater
legal certainty in which trade can occur.

We recently briefed your staff on the WTO's dispute settlement system,
focusing on member countries' use of the system since its founding over
5 years ago. Specifically, we examined (1) how WTO members have used the new
system, focusing primarily on cases involving the United States and (2) the
impact of these cases on foreign trade practices and U.S. laws and
regulations, and their overall commercial effects. This report summarizes
the contents of our briefing. In addition, per your request, we will be
issuing a more in depth report in August on the WTO dispute settlement
system, including an analysis of major issues that have arisen in its use.

WTO member countries have actively used the WTO dispute settlement system
during its first 5 years, filing 187 complaints as of April 2000.1 The
United States and the European Union were the most active participants, both
as plaintiffs and defendants. In the 42 cases involving the United States
that had either reached a final WTO decision or were resolved without a
ruling, we found that the United States has served as plaintiff in 25 cases
and defendant in 17 cases. As a plaintiff, the United States prevailed in a
final WTO dispute settlement ruling in 13 cases, resolved the dispute
without a ruling in 10 cases, and did not prevail in
2 cases. As a defendant, the United States prevailed in 1 case, resolved the
dispute without a ruling in 10 cases, and lost in 6 cases.

Overall, our analysis shows that the United States has gained more than it
has lost in the WTO dispute settlement system to date. WTO cases have
resulted in a substantial number of changes in foreign trade practices,
while their effect on U.S. laws and regulations has been minimal. In about
three-quarters of the 25 cases filed by the United States, other WTO members
agreed to change their practices, in some instances offering commercial
benefits to the United States. For example, in response to a 1998 WTO ruling
on Japanese distilled liquor taxes, Japan accelerated its tariff elimination
and reduced discriminatory taxes on competing alcohol imports. The year
following the resolution of the case, U.S. exports of whiskey to Japan, one
of the largest U.S. markets for distilled spirits, increased by 18 percent,
or $10 million. As for the United States, in 5 of the 17 cases in which it
was a defendant, two U.S. laws, two U.S. regulations, and one set of U.S.
guidelines were changed or subject to change.2 These changes have been
relatively minor to date and the majority of them have had limited or no
commercial consequences for the United States.3 For example, in one case
challenging increased U.S. duties on Korean semiconductor imports, the
United States took action to comply with the WTO ruling while still
maintaining the duties.

We obtained oral comments on a draft of this report from the Assistant U.S.
Trade Representative for Monitoring and Enforcement in the Office of the
United States Trade Representative. The Office generally agreed with the
conclusions in this report and provided us technical and clarifying
comments, which we incorporated as appropriate.

Briefing Section I provides aggregate data on WTO member countries'
participation in the WTO dispute settlement system since its inception in
1995. Briefing section II provides information and analysis on completed WTO
dispute settlement cases involving the United States, including resulting
agreed-to changes in foreign trade practices and U.S. laws and regulations
and the commercial effects involved. Appendix I provides further details on
the commercial consequences of the cases involving the United States.
Appendix II contains a description of our scope and methodology.

We are sending copies of this report to the Honorable Charlene Barshefsky,
the U.S. Trade Representative; the Honorable William M. Daley, Secretary of
Commerce; the Honorable Dan Glickman, Secretary of Agriculture; the
Honorable Lawrence F. Summers, Secretary of the Treasury; and interested
congressional committees. Copies will also be made available to other
interested parties on request.

If you or your staff have any questions about this report, please contact me
at (202) 512-4128. An additional GAO contact and staff acknowledgments are
listed in appendix III.

Sincerely yours,

Susan S. Westin, Associate Director
International Relations and Trade Issues

WTO Members' Use of Dispute Settlement System

Legend: EU = European Union

Note: The 187 cases filed as of April 18, 2000 excludes five cases in which
there were co-complainants (more than one country filing a complaint on the
same case).

Source: WTO data.

The United States has filed 56 complaints, or almost a third of the 187
complaints filed as of April 2000. The European Union (EU) was the next most
frequent filer, with 49 complaints or 26 percent of the total. Over a third
of the U.S. and EU cases were against each other.

Note: Percents do not add up to 100 percent because of rounding. In some
cases, multiple complaints are initiated against a WTO member about the same
"distinct matter." Thus, WTO members initiated 187 complaints regarding 150
distinct matters, a number of which are still pending.

Source: WTO data.

The United States was the most frequent defendant in WTO dispute settlement
cases. The 187 complaints filed pertained to 150 distinct matters; in some
cases, multiple complaints were filed against the same defendant. Of these
150 matters, 25 percent, or 38 cases, were filed against the United States,
a number of which are still pending. The EU was the second most frequent
defendant, with 26 cases filed against it.

WTO Dispute Settlement Cases Involving the United States

Source : Office of the U.S. Trade Representative.

Of the 150 distinct matters WTO members brought to the WTO, 42 cases
involving the United States were completed as of March 2000. The United
States was a plaintiff in 25 of these completed cases and a defendant in 17
cases. Completed cases include those that have gone through WTO litigation
with a panel or appellate body ruling and cases that were resolved without a
WTO ruling.

Legend

Ag/SPS = Agriculture, and sanitary and phytosanitary issues (human, animal,
and plant health)

IPR = Intellectual property rights (such as patent protection)

TRIMS = Trade-related investment measures (such as countries requiring that
foreign firms limit their imports to the amount they export).

Note: Section 301 of the Trade Act of 1974 (19 U.S.C. 2155) addresses
foreign unfair trade practices affecting U.S. exports of goods or services.

Source: GAO analysis.

The 42 completed cases involving the United States covered eight general
areas. One-quarter of the cases involved agriculture and sanitary and
phytosanitary issues (human, animal, and plant health).

Source: GAO analysis.

The 25 cases that the United States filed with the WTO resulted in several
types of changes in foreign laws, regulations, or practices. For example, in
one case involving a tax on imported liquor, Japan began lowering taxes and
tariffs on distilled spirits in 1998 after a WTO ruling found that Japan had
discriminated against imports. In another case, Japan lifted a varietal
testing requirement for imports of apples, cherries, and other fruits at the
end of 1999 after a WTO ruling found that the requirement was maintained
without sufficient scientific evidence. As a result, U.S. exports of these
fruits recently entered the Japanese market, with shipments in December 1999
and March 2000.

In a case the United States filed with the WTO challenging inadequate
intellectual property protection for pharmaceuticals and agricultural
chemicals, India passed legislation in March 1999 to establish a filing
system for patent applications on these products and to grant exclusive
marketing rights to the patent applicant. The WTO ruled that these changes
were called for under the Uruguay Round agreement on intellectual property
rights. Pakistan agreed to make similar changes to settle another WTO case
filed by the United States. In a case involving investment measures that may
limit or distort trade in the auto sector, Indonesia eliminated local
content requirements and other trade-restricting measures in 1999 after a
WTO ruling found Indonesia had discriminated against foreign investors.

Source: GAO analysis.

Of the 25 cases that the United States filed, 14 resulted in commercial
benefits to the United States, either through greater market access or
stronger intellectual property protection. For example, in a case involving
Korean standards for food imports, Korea made changes in its food code in
1995 and 1996 after a WTO case was filed. Korea's standard had previously
kept out approximately $87 million of U.S. chilled beef exports and $79
million of U.S. pork exports, according to Department of Agriculture
estimates. Also, in a case challenging Japan's inadequate time period for
protecting copyrights on sound recordings, Japan changed its copyright law
in 1996 after a WTO ruling. As a result of this change, U.S. sound
recordings will be protected for a 50-year period, including retroactively.
The U.S. recording industry estimated that these protections are worth about
$500 million annually, based on lost sales in 1995.

Source: GAO analysis.

In the 11 other cases that the United States filed with the WTO dispute
settlement body, 9 had limited commercial benefits, either because
(1) other barriers existed; (2) implementation of the WTO ruling was
incomplete or disputed; or (3) the case was brought mainly to uphold trade
principles. Regarding cases where other foreign barriers existed, the United
States challenged Canadian subsidies and import barriers in its

dairy market. Among other modifications, Canada changed its tariff-rate
quota system,4 which the U.S. dairy industry estimated could increase U.S.
exports by $45 million. However, the U.S. dairy industry cannot take
advantage of these changes until the United States and Canada conclude
separate, ongoing negotiations on fluid milk standards. Currently, neither
country can export fluid milk to the other (except in retail size
containers) due to differences in the two countries' standards.

Regarding WTO rulings whose implementation is incomplete or disputed, in two
high-profile cases the EU decided not to fully comply with WTO rulings
involving imports of bananas and hormone-treated beef. In addition, as of
early June, Australia had not complied with a 1999 WTO ruling that
maintained that Australia had provided an improper export subsidy grant to a
leather manufacturer; the WTO had recommended that the grant be repaid. The
United States and Australia have been negotiating a compliance plan. Also,
in a case primarily involving trade principles rather than commercial
interests, the United States filed a case against Hungary involving
agricultural export subsidies, although U.S. products do not directly
compete with the affected Hungarian exports. According to the Office of the
U.S. Trade Representative, the case was brought to protect the integrity of
the Uruguay Round Agreement on Agriculture. The Office maintained that
Hungary was in violation of the agreement's provisions limiting these
subsidies.

The United States initiated two WTO cases with high commercial stakes that
it lost. In the first case, involving alleged trade restrictions in Japan's
film and photographic supplies market, the United States failed to gain
greater access to this market as a result of the loss. In the other case,
the United States challenged an EU change in customs classification of local
area network equipment that resulted in higher tariffs for U.S. exports.
Although the United States lost the case, the effects of the loss were
mitigated by the WTO's 1997 Information Technology Agreement, which made
U.S. exports of this equipment duty free.

ource: GAO analysis.

Out of the 17 WTO cases in which U.S. practices were challenged, only one
resulted in a change in U.S. law, and that change was relatively minor. In
another case, the United States pledged to seek from Congress presidential
authority to waive certain provisions of a law. However, Congress has yet to
grant the President this authority.

Regarding the one change in U.S. law, the United States amended a 1996 rule
of origin law for determining the country of origin of U.S. textile and
apparel imports. The United States made this change in May 2000 in response
to a WTO case filed by the EU. The amendment changed the country of origin
of certain fabrics including silk, and of certain goods such as scarves,
from where the raw fabric was made, to where the product was both dyed and
printed with two additional finishing operations.5 The EU maintained that
the 1996 law's criteria for determining country of origin affected its
quota-free access to the United States. This is because raw fabric is often
produced in countries subject to U.S. quotas, such as China. According to
Department of Commerce data, the affected EU exports to the United States
are relatively small.

In another case, the EU challenged certain aspects of a U.S. law involving
trade sanctions against Cuba. The United States and the EU reached an
agreement in 1997 before a WTO dispute settlement panel ever met. Among
other things, the EU agreed to drop the dispute settlement case in return
for a U.S. pledge to seek from Congress presidential authority to waive
title IV of the Helms-Burton Act,6 which authorizes denial of U.S. visas to
persons involved in trafficking in confiscated Cuban property when certain
conditions are met. Congress has yet to grant the President authority to
waive title IV.

Source: GAO analysis.

Two U.S. regulations have been subject to change as a result of WTO rulings.
First, in a case brought by Venezuela and Brazil, the Environmental
Protection Agency (EPA) changed a regulation implementing the 1990 Clean Air
Act pertaining to the cleanliness of gasoline.7 EPA modified the regulation
in 1997 to give foreign suppliers the option of using a baseline for gas
cleanliness, based on their own performance rather than on an
EPA-established baseline (this treatment was already afforded to domestic
suppliers). EPA also put in place a mechanism to adjust the requirements if
the overall cleanliness of gas imports declines. Brazil and Norway, which
account for 0.18 percent of U.S. gas supplies, are currently the only
countries exporting to the United States under this option.

Also, as a result of a case brought by Korea involving dynamic random access
memory (DRAM) semiconductors, the Department of Commerce in 1999 changed its
standard for lifting an antidumping order8 to conform to WTO antidumping
provisions.9 The United States had imposed duties on certain Korean imports
of these semiconductors after it determined that they were being dumped in
the U.S. market. The WTO found that the previous U.S. standard placed too
high a burden of proof on the party contesting the continuation of an
antidumping order. After the U.S. regulation was changed, Commerce conducted
another review of Korean DRAM imports, and Commerce still found the
likelihood of continued dumping and kept the antidumping order in place. At
Korea's request, a panel is now examining U.S. compliance with the WTO
ruling.

Finally, as a result of a WTO case challenging a U.S. ban on imports of
shrimp harvested in a manner harmful to endangered sea turtles, in July 1999
the State Department revised a set of certification guidelines.10 The
revision provided more transparency (openness) and due process in making
decisions to grant countries' certification to export shrimp to the United
States. This change was very minor and, throughout the case, U.S.
restrictions on shrimp imports remained in effect. However, one of the
plaintiffs--Malaysia--has reserved its right to challenge U.S. compliance
with the WTO ruling.

Source: GAO analysis.

In the 17 cases in which the United States was a defendant, the United
States lost 6 cases, 5 of which had limited commercial consequences. The
sixth case, challenging provisions of U.S. tax law regarding foreign sales
corporations, has potentially very high commercial stakes. The United States
provides tax exemptions to a wide variety of companies on exported products
used abroad. In this case, a February 2000 WTO ruling found that these tax
provisions constituted prohibited export subsidies. The United States has
not fully determined how it will implement the WTO's decision.

Of the 11 WTO cases filed against the United States that were resolved
without a panel ruling or that the United States won, 5 had potentially high
commercial stakes. However, the outcomes of all 11 cases had a limited or no
commercial effect. For example, one of these high-stakes cases involved a
challenge by Mexico to the initiation of a U.S. antidumping investigation on
imports of certain fresh tomatoes. The U.S. International Trade Commission
reported that imports of fresh tomatoes from Mexico were $452 million, or
almost 36 percent, of the $1.27 billion U.S. market in 1995. The Commerce
Department and the U.S. International Trade Commission made preliminary
determinations that the Mexican imports were being sold at less than their
fair value and were causing material injury to the U.S. industry. If the
final investigations upheld these findings, the Commerce Department could
have placed duties on these imports to raise their price up to the fair
market value. Mexico requested WTO consultations with the United States
about this issue. Commerce, however, resolved the matter with a formal
commitment by Mexican growers not to sell their exports below a certain
price. This agreement was reached to eliminate the injurious effects of the
dumped imports on the U.S. industry.

The remaining six cases resulted in some U.S. government action, with
minimal commercial effect. For example, in a case challenging U.S. duties on
imports of urea (primarily used as a fertilizer) from the EU, the United
States removed the duties after it found that U.S. industry was not
interested in maintaining them.

Source: GAO analysis.

Our analysis shows that the United States has gained more than it has lost
in the WTO dispute settlement system to date, for several reasons. First,
the United States has been able to effect changes in several foreign laws,
regulations, and/or practices that it considered to be restricting trade.
Further, several of the cases in which the United States prevailed provided
commercial benefits to U.S. exporters or investors. In addition, WTO rulings
have upheld several trade principles that are important to the United
States, such as the patent protection provisions of the Uruguay Round
agreement on intellectual property rights and provisions in the Agreement on
Agriculture to eliminate export subsidies.

The dispute settlement system's impact on the United States should not be
evaluated solely on the basis of U.S. wins and losses. First, some winning
cases do not result in the desired outcomes. For example, the EU decided not
to fully comply with two WTO decisions involving bananas and hormone-treated
beef and instead face U.S. retaliation. Conversely, some losses are only
partial, as in the case regarding Korean DRAM semiconductors where the U.S.
antidumping order being challenged was maintained despite an adverse WTO
ruling. In addition, some losing cases actually uphold WTO principles
important to the United States, as in the case involving endangered sea
turtles, which expressly upheld provisions that protect the conservation of
natural resources, including sea turtles. Moreover, the United States
derives systemic benefits from a
well-functioning multilateral dispute settlement system, even if it does
lose some cases.

It is important to note, however, that there have not yet been a sufficient
number of WTO dispute settlement cases to fully evaluate the system. In
addition, the outcomes of some important pending WTO cases could be
problematic for the United States, including several cases that challenge
various aspects of U.S. trade laws, such as U.S. antidumping laws.

Commercial Consequences in 42 WTO Dispute Settlement Cases Involving the
United States

In the 25 disputes the United States filed with the World Trade Organization
(WTO), 14 cases resulted in commercial benefits to the United States, either
by achieving greater market access or stronger intellectual property
protection (see table 1). In nine cases, the United States gained limited
commercial benefits, either because (1) other trade barriers existed;
(2) implementation of the WTO ruling was incomplete or disputed; or
(3) the case was mainly brought to uphold trade principles (see table 2).
Finally, the United States lost two cases with high commercial stakes.

                                               Type of commercial benefit
                                                 Greater
  Defendant          Subject of case             market      Stronger IPR
                                                 access       protection

 Korea       Shelf-life standards for         X
             agricultural products
 Japan       Taxes on distilled spirits       X
 EU          Tariffs on grain                 X

 Canada      Import ban and tax measures on   X
             split-run magazinesa
 Turkey      Taxation of foreign films        X
             Trade-distorting investment
 Indonesia   measures in auto and auto-parts  X
             market

 Philippines Tariff-rate quotasb on pork and  X
             poultry

 Japan       Measures affecting imports of    X
             fruits
             Import restrictions on
 India       industrial, textile, and         X
             agricultural products

 Japan       Extension of copyright                        X
             protection on sound recordings

 Pakistan    Implementation of patent                      X
             "mailbox" provisionc
 Portugal    Patent term length                            X

 India       Implementation of patent                      X
             "mailbox" provisionc

 Sweden      Civil procedures for IPR                      X
             enforcement

Legend

IPR = Intellectual property rights

aA split-run edition of a magazine is one that is sold outside the
home-market and contains advertising directed at the foreign market.

bA tariff-rate quota is the application of a lower tariff rate for a
specified quantity of imported goods. Imports above this specified quantity
face a higher tariff rate.

cA patent mailbox is a system for filing patent applications.

Source: GAO analysis.

                                  Reasons for limited commercial effects
                                                               U.S. filed
                                   Other     Implementation  case primarily
 Defendant   Subject of case     barriers    incomplete or      to uphold
                                 existeda      disputed           trade
                                                               principles
           Specific duties on
 Argentina textiles and apparel X
           and taxes on other
           goods

 Korea     Taxes on distilled   X
           spirits
           Export subsidies and
 Canada    import quotas on     X
           dairy products
 EU        Banana import regime            X
 EU        Beef hormone ban                X

 Australia Export subsidies for            X
           leather producers
           Antidumping
 Mexico    investigation of                X
           high-fructose corn
           syrup

 Hungary   Agricultural export                               X
           subsidies
           Trade-distorting
 Brazil    investment measures                               X
           in auto and
           auto-parts market

aArgentina replaced its WTO-inconsistent duties and taxes with
WTO-consistent duties at their highest bound rates, or tariff rate ceiling
commitments under WTO. Korea complied with the WTO ruling by increasing its
taxes on domestic products rather than lowering them significantly on
imported goods. Canada modified its tariff-rate quota regime on fluid milk,
but the U.S. dairy industry cannot take advantage of this change until the
United States and Canada conclude separate, ongoing negotiations on fluid
milk standards. Currently, neither country can export fluid milk to the
other (except in retail size containers) due to differences in the two
countries' standards.

Source: GAO analysis.

The two cases that the United States filed but in which it did not prevail
were the Japanese film import barriers case in which the United States
failed to gain greater market access and the EU computer equipment customs
classification case, whose loss was mitigated by provisions of the 1997
Information Technology Agreement that made the affected equipment duty free.

Other WTO members brought 17 cases against the United States. In 11 cases,
the disputes were resolved without a WTO ruling, or the United States
prevailed. Some of these cases had high commercial stakes, but all were
resolved with limited or no commercial effect (see table 3). In the six
cases where the United States did not prevail, five cases had limited
commercial consequences, while one case where the ruling is yet to be
implemented has potentially high commercial stakes (see table 4).

                                                   Commercial effect
                                              Potentially     Outcome had
 Defendant  Plaintiff    Subject of case         high        limited or no
                                              commercial      commercial
                                                stakes          effect
                       Sections 301-310 of
 United                U.S. Trade Act of
 States     EU         1974 (U.S.           X              X
                       prevailed)

 United                Import duties on
 States     Japan      automobiles from     X              X
                       Japan

 United                Antidumping
 States     Mexico     investigation on     X              X
                       tomatoes from Mexico
 United
 States     EU         Helms-Burton Act     X              X
                       1989 section 301
 United                retaliation on
 States     EU         tomatoes and other   X              X
                       products from EU
 United                Antidumping duties
 States     EU         on urea from the EU                 X

 United                Antidumping duties
 States     Korea      on color televisions                X
                       from Korea

 United                Import restraint on
 States     India      wool coats from                     X
                       India

 United                Rules of origin for
 States     EU         textile and apparel                 X
                       products from EU

 United                USDA ban on imports
 States     EU         of EU-origin poultry                X
                       and poultry products
                       Measures affecting
 United                imports of cattle,
 States     Canada     swine, and grain                    X
                       from Canada

Legend

USDA = U.S. Department of Agriculture

Source: GAO analysis.

                                                     Commercial effects
                                                    Removal of
                                       Primarily    U.S. importAntidumping   Yet to be
                                     environmental  restraints    duties    implemented,
 Defendant Plaintiff     Subject of   rather than      with     maintained but potential
                           case                                  with no     for large
                                        economic      limited
                                       concerns     commercial  commercial   commercial
                                                      effect     effect       effect
 United   Venezuela,   Gasoline
 States   Brazil       imports       X
          India,
                       Ban on shrimp
 United   Malaysia,    imports to
 States   Pakistan,    protect sea   X
          Thailand,
          Philippines  turtles

 United                Import
 States   Costa Rica   restraints on                X
                       underwear
                       Import
 United                restraints on
 States   India        wool shirts                  X
                       and blouses
                       Antidumping
 United                duties on
 States   Korea        DRAMs from                              X
                       Korea
                       Tax treatment
 United                of U.S.
 States   EU           foreign sales                                       X
                       corporations

Legend

DRAM = Dynamic Random Access Memory

Source: GAO analysis.

Objectives, Scope, and Methodology

The Chairman of the House Ways and Means Committee requested that we review
the WTO's dispute settlement system, focusing on WTO member countries' use
of the system over the past 5 years. In conducting the work, we examined (1)
how WTO members have used the new system, focusing primarily on cases
involving the United States and (2) the impact of these cases on foreign
trade practices and U.S. laws and regulations, and their overall commercial
effects.

To examine how WTO members have used the system over the past 5 years, we
analyzed aggregate WTO data on member participation.

To evaluate the impact on U.S. laws and regulations and foreign practices,
we examined 42 cases involving the United States that the Office of the U.S.
Trade Representative identified as completed as of March 16, 2000. Completed
cases included those that had gone through WTO litigation with a panel
and/or appellate body ruling and cases that were resolved without a WTO
ruling. To determine the impact of the cases on U.S. laws and regulations,
and on foreign practices, we identified those cases whose outcome resulted
in a change in laws, regulations, or guidelines or any permanent change in
administrative procedures. We reviewed WTO dispute settlement documents
including requests for consultations, panel and appellate body decisions,
and other documents recording how the resolution of the cases was to be
implemented. We also reviewed U.S. Federal Register notices where
appropriate, as well as pertinent U.S. laws and regulations. We interviewed
senior officials from the Office of the United States Trade Representative,
including the Assistant U.S. Trade Representative for Monitoring and
Enforcement, on the major issues and outcomes of all 42 cases. Regarding
particular cases, we also met with
high-level officials from the Departments of Agriculture, Commerce, State,
and the Treasury, as well as the Environmental Protection Agency. We also
spoke with industry representatives, interest groups, trade attorneys, and
academics knowledgeable about WTO cases. To determine the changes in foreign
practices, we relied on WTO and foreign government documents, as well as
interviews with high-level U.S. government officials from the agencies
previously listed. We did not conduct an independent analysis of the foreign
changes or confirm those changes with the individual foreign governments.

To evaluate the commercial effects of the 42 cases, we examined the
available evidence for each case concerning the U.S. commercial interests
involved and the commercial consequences for the United States of the case's
resolution. However, we did not formally assess the economic impact on the
United States of each dispute's outcome. It is difficult and resource
intensive to distinguish among trade flows and competing factors affecting a
particular market in order to isolate the economic impact of a WTO decision.
Therefore, to present indicators of the commercial interests involved in the
disputes, we gathered information on the market size, the level of
investment, and the level of trade in the cases. In categorizing cases as
having potentially high commercial stakes, we examined whether the case
involved a high share of a particularly large market, large duties or
sanctions, or wider implications for U.S. trade and trade policy. We also
examined the trade barriers involved and the extent to which they were or
might be removed. In cases involving intellectual property protection, we
evaluated whether such protection had increased as a result of the case. In
addition, we examined changes in trade flows of particular products after
the resolution of a case.

To evaluate the commercial consequences of the cases, we also interviewed
government officials and industry experts with the Office of the U.S. Trade
Representative; the Departments of Agriculture, Commerce, Energy, State, and
the Treasury; as well as officials from the U.S. International Trade
Commission, the Patent and Trademark Office, and the National Marine
Fisheries Service. We used trade, market, and other data from the
Departments of Commerce, Energy, Agriculture, and the Treasury, as well as
the U.S. International Trade Commission, and the National Marine Fisheries
Service. When available, we examined government and industry group estimates
of the economic impact of the cases; however, we did not verify their
results.

We conducted our work from March through June 2000 in accordance with
generally accepted government auditing standards.

GAO Contact and Staff Acknowledgments

Elizabeth Sirois, (202) 512-8989

In addition to the person named above, Nina Pfeiffer, Shirley Brothwell,
Howard Cott, Kim Frankena, Juan Gobel, Anthony Moran, Mary Moutsos, Richard
Seldin, Tim Wedding, Katherine Woodward, and Rona Mendelsohn made key
contributions to this report.

(711511)

Table 1: Breakdown of 14 Cases the United States Filed, With
Commercial Benefits 30

Table 2: Breakdown of Nine Cases the United States Filed, With
Limited Commercial Effects 31

Table 3: Commercial Stakes and Outcome of 11 Cases Resolved
Without a Ruling, or Where United States Prevailed 32

Table 4: Commercial Effects of Six Cases Where the United States
Did Not Prevail 33
  

1. The 187 complaints filed as of April 18, 2000, excludes five cases in
which there were
co-complainants (more than one country filing a complaint on the same case).

2. Although guidelines are often general statements that do not impose
particular directions, sometimes they are specific and binding and
essentially equivalent to regulations.

3. In one recent case involving U.S. tax treatment of foreign sales
corporations, the WTO decided that the tax provisions were prohibited export
subsidies. The commercial consequences of this decision are potentially
high, but the United States has not fully determined how it will implement
the decision.

4. A tariff-rate quota is the application of a lower tariff rate for a
specified quantity of imported goods. Imports above this specified quantity
face a higher tariff rate.

5. 22 U.S.C. section 3592(b)(2) was amended by a provision in the Trade and
Development Act of 2000, Public Law 106-200, section 405.

6. 22 U.S.C. section 6091.

7. 40 C.F.R. part 80.

8. "Dumping" is generally defined as the sale of an exported product at a
price lower than that charged for a like product in the "home" market of the
exporters or at a price below cost. An antidumping order imposes additional
duties on imports when dumping is found.

9. 19 C.F.R. sections 351-222.

10. 64 Federal Register 36936 (July 8, 1999). According to the Department of
State, these guidelines implemented section 609 of Public Law 101-162
relating to the protection of sea turtles in shrimp trawl fishing operations
and are binding for countries that wish to export shrimp to the United
States.
*** End of document. ***