trump and the end of wto dispute settlement as we knew it

Why Trump Shot the Sheriffs:

The End of WTO Dispute Settlement 1.0

Chad P. Bown

Peterson Institute for International Economics

& Trade Talks podcast

1

Soumaya Keynes

The Economist

& Trade Talks podcast

ASSA Annual Meeting, January 2020

(preliminary)

Outline

1. What is WTO dispute settlement?

2. Where did it come from?

3. Why has the US killed it?

4. What next?

2

What is WTO dispute settlement?

• WTO members can complain about rule breaking to independent referees

• If arbiters say YES the rules have been broken…

• Either the rule-breaker has to change its ways

• Or the complainant gets to retaliate

3

What came BEFORE WTO dispute settlement?

• GATT dispute settlement deficiencies

• US use of Section 301 – “aggressive unilateralism”

• Voluntary Export Restraints

4

The Rise and Fall of Voluntary Export Restraints

0

2

4

6

8

10

12

14

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

PercentPercentPercent

1986-88 peak of 12%:• 6.4%: Autos (Japan)• 3.1%: Multi-Fibre Arrangement• 1.1%: Steel• 1.4%: Other (semiconductors, …)

1995: WTO goes into effect

Source: constructed by the authors with data from Bown (2019)

Share of US imports covered by demands that trading partners take on VERs, 1972-2019

5

WTO compromises…

• Voluntary Export Restraints

• Safeguards

• Anti-dumping

• Countervailing Duties

6

WTO compromises…

• US use of Section 301 – “aggressive unilateralism”

• Binding dispute settlement

7

…so what happened?

8

The US DID bring disputes against other countries

Share of WTO disputes as complainant vs Share of world exports, 1995-2016

AFGAGOALBARE

ARG

ARMATGAUS

BDIBENBFABGDBHRBLZBOL

BRA

BRBBRNBWACAF

CAN

CHE

CHL

CHN

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CPVCRI

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EUN

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GTM

GUYHKGHND

HTI

IDN

IND

ISLISRJAMJOR

JPN

KAZKENKGZKHMKNA

KOR

KWTLAOLCALKALSOMACMARMDAMDGMDV

MEX

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NPL

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PANPERPHL

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RUS

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THA

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UKR

URY

USA

VCTVEN

VNM

WSMZAFZMBZWE0

5

10

15

20

25

30

0 5 10 15 20 25

Share of Offensive Disputes (%)

Share of Export Value (%)

Source: constructed by the authors.9

The US mostly complained about SYSTEMIC issues

US targets of WTO dispute settlement, 1995-2016

Source: constructed by the authors.

10

Systemic issues, 49.8%



Trade remedies (AD,CVD, SG), 32.8%



Other bilateral issues, 17.4%



0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other countries diputesagainst other countries

(293 disputes)

Other countries diputes against US

(141 disputes)

US diputes brought against rest of world

(112 disputes)

Chart Title

Systemic issues Trade remedies(AD,CVD, SG)

Other bilateralissues

(112 disputes)

Other countries ALSO brought disputes AGAINST the US

Share of WTO disputes as defendant vs Share of world imports, 1995-2016

MNTISLCOGMRTBDITGOBWADJIMDGPRYBOLALBZMBMWILAOKWTFJI AREPNGKGZMKDLSOQATNAMGEOWSMNGAGUYMMRMDVKNAMACVCTRWASWZGMBGINJORMNGBRNGRDBLZTONKHMSURMUSISRKAZGABCMRGNBUGA SAUBENKENSENBRBSYCBHRTUNBFANERCPVSLBTZACAFMLISLELCAOMNJAMCIVDMAGHAAGONPLZWEAFGMOZATG

CHL

VEN

USA

MDA

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MAR MYS SGP

BRA JPN

CRIZAFPER

ARM THA

CAN

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MEX

NORHND

IDN

CHN

TUR

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ARG

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KOR

HKGCOL

RUS

EUN

IND

PHL

0

5

10

15

20

25

30

0 5 10 15 20 25

Share of Defensive Disputes (%)

Share of Import Value (%)

Source: constructed by the authors.11










0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


(293 disputes)


(141 disputes)


(112 disputes)

Chart Title



(293 disputes)

Countries used WTO dispute settlement to target US trade remedies

Source: constructed by the authors.

Targets of WTO dispute settlement, 1995-2016

12










0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


(293 disputes)


(141 disputes)


(112 disputes)

Chart Title



(141 disputes)

HOW did the US shoot the sheriffs?

• Warnings - blocking appointments/reappointments (pre-Trump)

• 2007, 2011, 2016

• Then… Trump

• December 10, 2019

13

WHY did the US shoot the sheriffs?

14

Senate hearing in 2000 reviewing performance of WTO dispute settlement…

“inadequately prepared panelists, who are not reviewed effectively for bias, staffed by international bureaucrats who seek to advance substantive agendas of their own, meet in secret, and can cause a chain of events leading to a reordering of US laws that would ordinarily take the Committees of jurisdiction of the Congress, the two Houses of Congress, and the President acting after serious deliberation.”

Robert Lighthizer & Alan Wolff, 2000

WHO has power?


15

US LOST disputes

Accusation: Appellate Body DENIED flexibility the US thought it had negotiated

“I think that the Americans who negotiated that text did a pretty good job. I mean, when I read it, and I think when most American lawyers read it, it looks as though you have created a process whereby there will be a panel, and then there will be an Appellate Body, but that Appellate Body is really constrained. It says that they have to make a decision within 90 days, it says that they can't change the rules and obligations of the parties, you have provisions like Article 17.6 that are supposed to give deference to members in sensitive areas like the anti-dumping laws. So on paper, it appears to look like a reasonable set of rules. In reality, none of those paper protections did the United States very much good at all.”

Source: Trade Talks, Episode 111 ex-USTR GC Stephen Vaughn, 2019

0

1

2

3

4

5

6

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

China EU Japan and South Korea All other countries

Percent

Can we see this in the DATA?

Consistent but not necessarily causal

US imports covered by trade remedies by source, 1975-2019

Source: constructed by the authors with data from Bown (2019). Trade remedies = antidumping, countervailing duties, safeguards and China-

specific transitional safeguard (2001-2014 only). 16


17

System inadequate when dealing with CHINA

Limits on US defences against China (public bodies)…

…and FRUSTRATION over having to do ALL the heavy lifting

“other countries look to us to carry that burden and are very happy to hold our coat while we do so…but not invest themselves in that effort. Sometimes they are willing to join cases; and on occasion they're willing to initiate cases, and we join them and have in the past. But more often than not, they come to us; they're very happy to have us go and pursue these issues with China, but they don't necessarily invest a huge amount of effort themselves.”

Source: Trade Talks, Episode 93 ex-USTR Mike Froman

No one aside from the US really brought systemic cases against China alone

18

with other WTO members(7 disputes)

with United States(7 disputes, 12 disputes x countries)

Alone(1 dispute)

Alone(11 disputes)

0 5 10 15 20

Other WTO members

(13 disputes)

United States

(18 disputes)

Chart Title

with other WTO members

(7 disputes)

with United States

(7 disputes, 12 disputes x countries)

Alone

In summary…

• Long-standing concerns over sovereignty and flexibility

• US losing cases

• Not effective enough with respect to new offensive interests

19

Is the US right?

• Sovereignty – US never FORCED to do anything

• Trade remedies – ESPECIALLY anti-dumping – flawed

• There are legal arguments in favour of US case…

• Very unclear this is the product of a reasoned cost-benefit analysis

20

trump and the end of wto dispute settlement as we knew it

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