Dispute Settlement in the World Trade
Organization (WTO): An Overview
Jeanne J. Grimmett
Legislative Attorney
March 10, 2011
Congressional Research Service
7-5700
www.crs.gov
RS20088
CRS Report for Congress
P
repared for Members and Committees of Congress
Dispute Settlement in the World Trade Organization (WTO): An Overview
Summary
The World Trade Organization (WTO) Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU) provides a means for WTO Members to resolve disputes arising
under WTO agreements. WTO Members must first attempt to settle their dispute through
consultations, but if these fail the Member initiating the dispute may request that a panel examine
and report on its complaint. The DSU provides for Appellate Body (AB) review of panel reports,
panels to determine if a defending Member has complied with an adverse WTO decision by the
established deadline in a case, and possible retaliation if the defending Member has failed to do
so. Automatic establishment of panels, adoption of panel and appellate reports, and authorization
of a Member’s request to retaliate, along with deadlines and improved multilateral oversight of
compliance, are aimed at producing a more expeditious and effective system than had existed
under the General Agreement on Tariffs and Trade (GATT). To date, 423 complaints have been
filed under the DSU, approximately one-half resulting in panels. Nearly one-half of the 423
complaints involve the United States as a complainant or defendant. The Office of the United
States Trade Representative (USTR) represents the United States in WTO disputes.
Use of the DSU has revealed procedural gaps, particularly in the compliance phase of a dispute.
These include a failure to coordinate DSU procedures for requesting retaliation with procedures
for requesting a compliance panel and the absence of a specific procedure aimed at the removal of
trade sanctions in the event the defending Member believes it has fulfilled its WTO obligations in
a case. To overcome these gaps, disputing Members have entered into bilateral agreements
permitting retaliation and compliance panel procedures to advance in sequence and have initiated
new dispute proceedings seeking the removal of retaliatory measures believed to have outlived
their legal foundation. Expressing dissatisfaction with WTO dispute settlement results involving
U.S. trade remedies, Congress, in the Trade Act of 2002, directed the executive branch to address
dispute settlement in WTO negotiations. WTO Members have been negotiating DSU revisions in
the currently stalled Doha Development Round.
Section 301 of the Trade Act of 1974 provides a mechanism for the USTR, either by petition of
an “interested party” or on its own accord, to address restrictive foreign trade practices through
the initiation of a WTO dispute and authorizes the USTR to take retaliatory action in the event the
defending WTO Member has not complied with the resulting WTO decision. While the European
Union challenged Section 301 in the WTO on the ground that it requires the USTR to act
unilaterally in WTO-related disputes in violation of DSU requirements, the United States was
ultimately found to be in compliance with its DSU obligations. Where a U.S. law or regulation is
at issue in a WTO case, the WTO’s adoption of a panel and, if appealed, AB report finding that
the U.S. measure violates a WTO agreement does not give the WTO decision direct legal effect in
this country. Thus, federal law is not affected until Congress or the executive branch, as the case
may be, takes action to remove the offending measure.
Among 111th Congress bills, H.R. 496 (Rangel) would have created an Office of the
Congressional Trade Enforcer to investigate restrictive foreign trade practices in light of WTO
obligations and call on the USTR to pursue WTO cases where alleged violations were found; S.
363 (Snowe) would have granted the U.S. Court of International Trade exclusive jurisdiction to
review certain USTR determinations under Section 301 and would have amended various Section
301 authorities themselves; and S. 1466 (Stabenow) and S. 1982 (Brown) would have established
mechanisms under the Trade Act of 1974 to require the USTR to identify particularly harmful
foreign trade practices and, where appropriate, to initiate WTO cases to remedy these practices.
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Dispute Settlement in the World Trade Organization (WTO): An Overview
Contents
Background ................................................................................................................................ 1
WTO Dispute Settlement Understanding ..................................................................................... 2
Steps in a WTO Dispute .............................................................................................................. 4
Consultations (Article 4) ....................................................................................................... 4
Establishing a Dispute Panel (Articles 6, 8) ........................................................................... 4
Panel Proceedings (Articles 12, 15, Appendix 3) ................................................................... 5
Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)........................................ 6
Implementation of Panel and Appellate Body Reports (Article 21) ........................................ 6
Compliance Panels (Article 21.5) .......................................................................................... 6
Compensation and Suspension of Concessions (Article 22) ................................................... 7
Use of Multilateral Dispute Settlement Procedures ...................................................................... 8
Compliance Issues ...................................................................................................................... 8
“Sequencing” ........................................................................................................................ 8
Removal of Retaliatory Measures.......................................................................................... 9
WTO Dispute Settlement and U.S. Law .................................................................................... 11
Legal Effect of WTO Decisions........................................................................................... 11
Section 301 of the Trade Act ............................................................................................... 11
111th Congress Legislation ........................................................................................................ 14
Contacts
Author Contact Information ...................................................................................................... 15
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Dispute Settlement in the World Trade Organization (WTO): An Overview
Background
From its inception in 1947, the General Agreement on Tariffs and Trade (GATT), signed by the
United States and ultimately by a total of 128 countries, provided for consultations and dispute
resolution between GATT parties. A party could invoke Articles XXII and XXIII, the GATT
consultation and dispute settlement provisions, if it believed that another party’s measure,
whether violative of the GATT or not, nullified or impaired benefits accruing to it under the
agreement. Because the GATT did not set out specific dispute procedures, GATT Parties
developed a more detailed process including ad hoc panels and other practices. Over time,
however, the GATT procedure was perceived to have certain deficiencies, among them a lack of
deadlines, a consensus decision-making process that allowed a GATT party against whom a
dispute was filed to block the establishment of a dispute panel and the adoption of a panel report
by the GATT Parties as a whole, and laxity in surveillance and implementation of panel reports
even when reports were adopted and had the status of an official GATT decision.
Congress made reform of the GATT dispute process a principal U.S. negotiating objective in the
GATT Uruguay Round of Multilateral Trade Negotiations, begun in 1986 and concluded in 1994
with the signing of the Marrakesh Agreement Establishing the World Trade Organization (WTO
Agreement).1 The resulting WTO Understanding on Rules and Procedures Governing the
Settlement of Disputes (Dispute Settlement Understanding or DSU) reflects the U.S. negotiating
objective of creating a mechanism that is more judicial in approach (and, it was hoped, fairer and
more predictable) than the diplomatically oriented system favored by other trading partners.2
While the DSU retains diplomatic elements—for example, the goal of the process is to secure a
“mutually agreed solution” and contains provisions that may foster a negotiated outcome—the
DSU sets out a mechanism that is overall more “rule-bound” than the process developed under
the GATT.
Further, the DSU applies to disputes arising under virtually all WTO agreements and thus exists
in the context of the full Uruguay Round package of multilateral trade agreements, all of which
must be accepted by a country as a condition of WTO membership. The Uruguay Round package
not only carried forward original GATT obligations—for example, according goods of other
parties most-favored-nation (MFN) and national treatment, not placing tariffs on goods in excess
of negotiated or “bound” rates, generally refraining from imposing quantitative restrictions such
as quotas and embargoes on imports and exports, and avoiding injurious subsidies3—but also
1 Omnibus Trade and Competitiveness Act of 1988, P.L. 100-418, § 1101(b)(1), 19 U.S. C. § 2901(b)(1).
2 See, e.g., Mitsu Matsushita, Thomas J. Schoenbaum & Petros C. Mavroidis, THE WORLD TRADE ORGANIZATION:
LAW, PRACTICE, AND POLICY 107-108 (2d ed. 2006); Andreas F. Lowenfeld, Remedies Along with Rights: Institutional
Reform in the New GATT, 88 AM. J. INT’L L. 477, 479-81 (1994); Uruguay Round Agreements Act Statement of
Administrative Action, H.Doc. 103-316, v. 1, at 339 (1994). Regarding the “diplomatic” versus the “rule-oriented”
approach to dispute settlement, see, e.g., Ernst-Ulrich Petersmann, THE GATT/WTO DISPUTE SETTLEMENT SYSTEM 66-
70 (1997), and John H. Jackson, THE WORLD TRADING SYSTEM 85-88, 109-113 (1989).
3 The General Agreement on Tariffs and Trade 1994 (GATT 1994), one of the multilateral trade agreements that must
be accepted as a condition of WTO membership, is an updated and enlarged version of the GATT adopted in 1947. The
GATT 1994 retains the text of the 1947 agreement, as amended in the interim, but also includes various GATT tariff
protocols, protocols of accession, decisions on waivers, other GATT decisions, Understandings on GATT articles
agreed to during the Uruguay Round, and the Marrakesh Protocol to GATT 1994. It is under the Marrakesh Protocol
that tariff concessions and market access commitments agreed to by negotiating countries during the Uruguay Round
become legally binding. See generally Kevin Kennedy, The GATT 1994 in 1 THE WORLD TRADE ORGANIZATION:
LEGAL, ECONOMIC AND POLITICAL ANALYSIS 112-114 (Patrick F. J. Macrory, Arthur E. Appleton & Michael G.
Plummer eds. 2005).
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Dispute Settlement in the World Trade Organization (WTO): An Overview
expanded on these obligations in new agreements such as the Agreement on Agriculture, the
Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on
Antidumping, the Agreement on Subsidies and Countervailing Measures, and the General
Agreement on Trade in Services (GATS).4 The application of the DSU to these new agreements
thus created the potential not only for trade disputes on matters that had not been subject to
adjudication in the past, but also for adjudication of these disputes under a more judicially styled
process than had existed in the past.
Congress approved and implemented the WTO Agreement and the other agreements negotiated in
the Uruguay Round in § 101 of the Uruguay Round Agreement Act, P.L. 103-465, 19 U.S.C.
§ 3511. The agreements entered into force on January 1, 1995.
WTO Dispute Settlement Understanding
While the WTO Dispute Settlement Understanding (DSU) continues past GATT dispute practice,5
a variety of new features are aimed at strengthening the prior system. These include a “reverse
consensus” voting rule at key points in the process, legal review of panel reports by a new
Appellate Body, deadlines for various phases of the dispute procedure, and improved multilateral
oversight of compliance.6 Under the integrated system of dispute settlement created in the DSU,
the same dispute settlement rules apply to disputes under virtually all WTO agreements, subject
to any special or additional rules in an individual agreement.
The WTO Dispute Settlement Body (DSB), created in Article 2 of the DSU and consisting of
representatives of all WTO Members, administers WTO dispute settlement proceedings. As was
the case under the GATT, the DSB ordinarily operates by consensus (i.e., without objection). The
DSU reverses past practice, however, in a manner that prevents individual Members from
blocking certain DSB decisions that are considered critical to an effective dispute settlement
system. Thus, unless it decides by consensus not to do so, the DSB will (1) approve requests to
establish panels, (2) adopt panel and appellate reports, and (3) if requested by the prevailing
Member in a dispute, authorize the Member to impose a retaliatory measure where the defending
Member has not complied. In effect, these decisions are virtually automatic.
Given that panel reports would otherwise be adopted under the reverse consensus rule, WTO
Members have a right to appeal a panel report on legal issues. The DSU creates a standing
Appellate Body to carry out this added appellate function. The Appellate Body has seven
members, three of whom serve on any one case.
4 For further background on WTO agreements, see CRS Report R41306, Trade Law: An Introduction to Selected
International Agreements and U.S. Laws, by Emily C. Barbour.
5 In addition, GATT Articles XXII and XXIII, the GATT consultation and dispute settlement articles, continue to serve
as the legal basis for dispute settlement under WTO agreements on trade in goods. See, e.g., Agreement on Agriculture
art. 19.
6 The text of the DSU, panel and Appellate Body reports, and information on the WTO dispute process are available at
http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm. WTO disputes are listed and summarized by the WTO
Secretariat in its “Update of WTO Dispute Settlement Cases,” available at the WTO website, above. Information on
WTO disputes involving the United States, including the text of U.S. written submissions to WTO panels, may be
found at the USTR website, at http://www.ustr.gov/trade-topics/enforcement. For the status of current cases in which
the United States has been successfully challenged, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S.
Compliance in Pending Cases, by Jeanne J. Grimmett [hereinafter CRS Report RL32014].
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Notwithstanding the rule-oriented nature of the DSU, dispute settlement in the WTO is primarily
Member-driven. In other words, it is up to the disputing Members (complaining or defending, as
the case may be) to decide whether or not to take particular actions available to them. These
actions include initiating the dispute; requesting a panel and, in doing so, setting out the scope of
dispute; asking the WTO Director-General (DG) to appoint panelists if the disputing Members
cannot agree on the WTO Secretariat’s proposed slate; seeking authorization to impose
countermeasures against a non-complying Member; requesting that the prevailing Member’s
retaliation proposal be arbitrated; and imposing retaliatory measures even if the DSB has
authorized them. As stated in Article 3.7 of the DSU, the preferred outcome of a dispute is “a
solution mutually acceptable to the parties and consistent with the covered agreements.” Absent
this, the primary objective of the process is withdrawal of a violative measure, with compensation
and retaliation being avenues of last resort.
As of the date of this report, 423 complaints have been filed under the DSU, with approximately
one-half of these resulting in the establishment of a panel. In some of these proceedings, however,
the panel process was discontinued due to a settlement of the dispute or for other reasons. To date,
140 original panel reports have been publicly circulated. Some original panels also issued an
additional report or reports under Article 21.5 of the DSU in which they determined whether the
defending Member had complied in a particular dispute; to date, 29 compliance panel reports
have been issued. Approximately 65% of original and Article 21.5 panel reports have been
appealed.7
Nearly one-half of the 423 WTO complaints filed to date involve the United States as
complaining party or defendant. The United States Trade Representative (USTR) manages U.S.
participation and is the chief representative of the United States in the WTO, including in WTO
disputes.8
The DSU was scrutinized by WTO Members under a Uruguay Round Declaration, which called
for completion of a review within four years after the WTO Agreement entered into force (i.e., by
January 1999). Members did not agree on any revisions in the initial review and continued to
negotiate on dispute settlement issues during the current WTO Doha Development Round of
multilateral trade negotiations, doing so on a separate track permitting an agreement to be
adopted apart from any overall Doha Round accord.
The United States has proposed such revisions as greater Member control over the process,
guidelines for WTO adjudicative bodies, and increased transparency—for example, open
meetings and timely access to submissions and final reports.9 Other Member proposals include,
inter alia, a permanent roster of panelists, enabling the Appellate Body to remand decisions to
panels for further proceedings, rules for sequencing and the termination of retaliatory measures
7 Lists of WTO panel and Appellate Body reports are available in the “Free Resources” section of WorldTradeLaw.net
at, respectively, http://www.worldtradelaw.net/reports/wtopanels/wtopanels.asp and http://www.worldtradelaw.net/
reports/wtoab/abreports.asp.
8 Trade Act of 1974, P.L. 93-618, § 141(c)(1)(C),(D), 19 U.S.C. § 2171(c)(1)(C),(D). See also Uruguay Round
Agreements Act, P.L. 103-465, §§ 123, 127, 129, 19 U.S.C. § 3533, 3537, 3538.
9 See, e.g., WTO documents TN/DS/W/79 (July 13, 2005), TN/DS/W/82 (October 24, 2005), TN/DS/W/82/Add.1
(October 25, 2005), as corrected, and TN/DSW/86 (April 21, 2006). See also documents posted on the USTR website,
at http://www.ustr.gov/trade-topics/enforcement/us-proposals-wto-dispute-settlement-understanding-negotiations.
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(see below), tightened time frames, enhanced third-party rights, and special treatment for
developing country disputants.10
In 2008, the chairman of the dispute settlement negotiations prepared a consolidated draft legal
text based mainly on Member proposals, which Members agreed to use in their negotiations.11
Although the outcome of Doha Round negotiations remains uncertain, WTO Members are
expected to continue discussions of the DSU through 2011.12
Steps in a WTO Dispute
Following are the stages in a DSU proceeding, with the applicable DSU articles for each.
Consultations (Article 4)
Under the DSU, a WTO Member may request consultations with another Member regarding
“measures affecting the operation of any covered agreement taken within the territory” of the
latter. If a WTO Member requests consultations with another Member under a WTO agreement,
the latter Member must enter into consultations with the former within 30 days.13
If the dispute is not resolved within 60 days, the complaining Member may request a panel. A
panel may be requested before this period ends if the defending Member has failed to enter into
consultations or if the disputants agree that consultations have been unsuccessful.
Establishing a Dispute Panel (Articles 6, 8)
The WTO Member requesting a panel must do so in writing and “identify the specific measures at
issue and provide a brief summary of the legal basis for the complaint sufficient to present the
problem clearly.” Under GATT and now WTO dispute settlement practice, a Member may
challenge a measure of another Member “as such,” “as applied,” or both.14 An “as such” claim
challenges the measure independent of its application in a specific situation and, as described by
10 For further information on proposals, see Institute of International Economic Law, DSU Review, at
http://www.law.georgetown.edu/iiel/research/projects/dsureview/synopsis.html.
11 Special Session of the Dispute Settlement Body, Report by the Chairman to the Trade Negotiations Committee,
TN/DS/23 (December 5, 2008).
12 Office of the U.S. Trade Representative, 2011 TRADE POLICY AGENDA AND 2010 ANNUAL REPORT 16-17 (Mar. 2011).
See also Special Session of the Dispute Settlement Body, Report by the Chairman to the Trade Negotiations Committee
for the purpose of the TNC stocktaking exercise, TN/DS/24 (March 22, 2010).
13 Once the WTO is notified that a request for consultations has been made, the dispute will be assigned a number.
Disputes are numbered in chronological order. The prefix WT/DS, followed by the assigned number, is then used to
designate WTO documents issued in connection with the dispute. For example, the dispute between the United States
and China, China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audio
Entertainment Products is DS363, with the U.S. request for consultations sent to China on August 10, 2007, numbered
WT/DS363/1, and the WTO Appellate Body report issued on December 21, 2009, numbered WT/DS363/AB/R.
14 Appellate Body Report, United States—Anti-dumping Act of 1916, paras. 60-61, WT/DS136/AB/R,
WT/DS162/AB/R (August 28, 2000).
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the WTO Appellate Body, seeks to prevent the defending Member from engaging in identified
conduct before the fact.15
If a panel is requested, the DSB must establish it at the second DSB meeting at which the request
appears as an agenda item, unless it decides by consensus not to do so. Thus, while a defending
Member may block the establishment of a panel the first time the complaining Member makes its
request at a DSB meeting, the panel will be established, virtually automatically, the second time
such a request is placed on the DSB’s agenda. Although the DSB ordinarily meets once a month,
the complaining Member may request that the DSB convene for the sole purpose of considering
the panel request. Any such meeting must be held within 15 days after the complaining Member
requests that the meeting be held.
The panel is ordinarily composed of three persons. The WTO Secretariat proposes the names of
panelists to the disputing parties, who may not oppose them except for “compelling reasons”
(Art. 8.6). If the disputing parties fail to agree on panelists within 20 days from the date that the
panel is established, either disputing party may request the WTO Director-General to appoint the
panel members. Because the Director-General may only act upon request in this situation, it is
possible that disputing Members may not make such a request immediately or may not do so at
all, thus permitting them to attempt to resolve their dispute before the adjudicatory process
begins.
Panel Proceedings (Articles 12, 15, Appendix 3)
Once the panel is constituted, it hears written and oral arguments from the disputing parties. After
considering these presentations, it issues the descriptive part of its report (facts and argument) to
the disputing parties. Taking into account any comments from the parties, the panel then submits
this portion of the report, along with its findings and conclusions, to the disputants as an interim
report. Following a review period, a final report is issued to the disputing parties and later
circulated to all WTO Members.
A panel must generally provide its final report to disputants within six months after the panel is
composed, but may take longer if needed; extensions are usual in complex cases. The period from
panel establishment to circulation of a panel report to WTO Members should not exceed nine
months. In practice, panels have been found to take more than 13 months on average to publicly
circulate reports.16
15 Appellate Body Report, United States—Sunset Review of Anti-Dumping Measures on Oil Country Tubular Goods
from Argentina, para. 172, WT/DS268/AB/R (November 29, 2004). The Appellate Body further described “as such”
claims as follows:
By definition, an “as such” claim challenges laws, regulations, or other instruments of a Member
that have general and prospective application, asserting that a Member’s conduct—not only in a
particular instance that has occurred, but in future situations as well—will necessarily be
inconsistent with that Member’s WTO obligations. In essence, complaining parties bringing “as
such” challenges seek to prevent Members ex ante from engaging in certain conduct. The
implications of such challenges are obviously more far-reaching than “as applied” claims.
16 See, e.g., Henrik Horn & Petros C. Mavroidis, The WTO Dispute Settlement System 1995-2006: Some descriptive
statistics, at 28-29 (March 14, 2008), at http://siteresources.worldbank.org/INTRES/Resources/469232-
1107449512766/DescriptiveStatistics_031408.pdf. A recent example is the panel in China—Measures Related to the
Exportation of Various Raw Materials, a dispute proceeding initiated separately by the United States, the European
Union, and Mexico. In this case, the panel, which was established on December 21, 2009, and composed on March 30,
(continued...)
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Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)
Within 60 days after a panel report is circulated to WTO Members, the report is to be adopted at a
DSB meeting unless a disputing party appeals it or the DSB decides by consensus not to adopt it.
The DSU, at Article 17.6, limits appeals to “issues of law covered in the panel report and legal
interpretations developed by the panel.”
Within 60 days of being notified of an appeal (extendable to 90 days), the WTO Appellate Body
(AB) must issue a report that upholds, reverses, or modifies the panel report. The AB report is to
be adopted by the DSB, and unconditionally accepted by the disputing parties, unless the DSB
decides by consensus not to adopt it within 30 days after circulation to Members.
The period of time from the date the panel is established to the date the DSB considers the panel
report for adoption is not to exceed nine months (12 months where the report is appealed) unless
otherwise agreed by the disputing parties.
Implementation of Panel and Appellate Body Reports (Article 21)
In the event that the WTO decision finds the defending Member has violated an obligation under
a WTO agreement, the Member must inform the DSB of its implementation plans within 30 days
after the panel report and any AB report are adopted. If it is “impracticable” for the Member to
comply immediately, the Member will have a “reasonable period of time” to do so. The Member
is expected to implement the WTO decision fully by the end of this period and to act consistently
with the decision after the period expires.17 Compliance may be achieved by withdrawing the
WTO-inconsistent measure or, alternatively, by modifying or replacing it.18
Under the DSU, the “reasonable period of time” is (1) that proposed by the Member and
approved by the DSB; (2) absent approval, the period mutually agreed by the disputants within 45
days after the report or reports are adopted by the DSB; or (3) failing agreement, the period
determined through binding arbitration. Arbitration is to be completed within 90 days after
adoption of the reports. To aid the arbitrator in determining the length of the compliance period,
the DSU provides a non-binding guideline of 15 months from the date of adoption. Arbitrated
compliance periods have ranged from six months to 15 months and one week. The DSU envisions
that a maximum 18 months will elapse from the date a panel is established until the reasonable
period of time is determined.
Compliance Panels (Article 21.5)
Either disputing Member may request that a compliance panel be convened under Article 21.5 of
the DSU in the event the disputants disagree as to whether the defending Member has complied.
(...continued)
2010, has reported to the DSB that it will not meet the six-month deadline and instead expects to conclude its work by
April 2011. Communication from the Chairman of the Panel, China—Measures Related to the Exportation of Various
Raw Materials, WT/DS394/10, WT/DS3905/10, WT/DS389/9 (October 21, 2010).
17 E.g., Report of the Appellate Body, United States—Measures Relating to Zeroing and Sunset Reviews, Recourse to
Article 21.5 of the DSU by Japan, paras. 153-158, WT/DS322/AB/RW (August 18, 2009).
18 Id. para. 154.
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The disagreement may have do with whether a compliance measure exists, or whether a measure
that has been taken to comply is consistent with the WTO decision in the case. The DSU provides
that, wherever possible, the original panel should be re-convened to hear the compliance dispute.
A compliance panel is expected to issue its report within 90 days after the dispute is referred to it,
but it may extend this time period if needed. Compliance panel reports may be appealed to the
WTO Appellate Body and both reports are subject to adoption by the DSB.
Compensation and Suspension of Concessions (Article 22)
If the defending Member fails to comply with the WTO decision within the established
compliance period, Article 22 permits the prevailing Member to request that the defending
Member negotiate a compensation agreement. If such a request is made and agreement is not
reached within 20 days after the compliance deadline expires, or, more likely, if negotiations have
not been requested, the prevailing Member may request authorization from the DSB to retaliate,
that is, suspend concessions or obligations owed the non-complying Member under a WTO
agreement. Article 22 requires the DSB to authorize the request within 30 days after the
compliance deadline expires unless the DSB decides by consensus not to do so, or the defending
Member requests that the retaliation proposal be arbitrated.
Generally, a Member should first try to suspend concessions or obligations in the same trade
sector as the one at issue in the dispute. If this is “not practicable or effective,” the Member may
then seek to suspend concessions in another sector under the same WTO agreement. If, however,
suspending concessions in other sectors under the same agreement is not “practicable or
effective” and “the circumstances are serious enough,” the Member may seek to suspend
concessions or obligations under another WTO agreement, or “cross-retaliate.”
Retaliation most often involves the suspension of GATT tariff concessions—that is, the
imposition of tariff surcharges—on selected products from the non-complying Member. In some
cases, however, that Member may not be a major exporter of goods to the prevailing Member or
some or all of the goods that are exported may be critical to the prevailing Member’s economy.
Thus, if firms of the non-complying Member are active service providers or exercise significant
intellectual property rights in the other Member’s territory, the prevailing Member may seek to
suspend market access obligations under the General Agreement on Trade in Services (GATS) or
obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights
(Agreement on TRIPS).
As noted above, the defending Member has a right under the DSU to object to a retaliation
proposal. Article 22.6 of the DSU permits the defending Member to object to the level of the
proposed retaliation (i.e., that it is not equivalent to the level of trade injury in the dispute), claim
that DSU principles and procedures for requesting cross-retaliation have not been followed, or
both.19 Once requested, arbitration is automatic and is to be completed within 60 days after the
compliance period ends. An arbitral decision is considered final.20
19 See Decision by the Arbitrator, United States—Subsidies on Upland Cotton, Recourse to Arbitration by the United
States under Article 22.6 of the DSU and Article 4.21 of the SCM Agreement, paras. 5.10-5.236, WT/DS267/ARB/1
(August 31, 2009), for a recent arbitral analysis of a request to cross-retaliate. In response to U.S. non-compliance in
Brazil’s challenge of U.S. cotton subsidies, Brazil sought authorization to suspend concessions under the Agreement on
Trade-Related Aspects of Intellectual Property Right and the General Agreement on Trade in Services, arguing, as
required under the DSU, that suspending concessions on goods alone was not “practicable or effective” and that the
(continued...)
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After the arbitral decision is issued, the prevailing party may request that the DSB approve its
proposal, subject to any modification by the arbitrator. The prevailing Member is not required to
request authorization, nor is the Member required to do so by a given date if it chooses to pursue
such a request. Further, even if measures are authorized, the prevailing Member is not required to
impose them. If the Member does so, however, the measures may not remain in effect once the
offending measure is removed or the disputing parties otherwise resolve the dispute.
Use of Multilateral Dispute Settlement Procedures
Article 23 of the DSU requires that WTO Members invoke DSU procedures in disputes involving
WTO agreements and that they act in accordance with the DSU—that is, not unilaterally—when
taking various dispute-related actions. These are: (1) determining if another Member has violated
a WTO agreement (Art. 23(a)); (2) determining a date by which the Member must comply with a
WTO decision (Art. 23(b)); and (3) taking any retaliatory action against a non-complying
Member (Art. 23(c)). Regarding retaliatory action, the prevailing Member must follow DSU
procedures in determining the amount of trade retaliation to be imposed and must obtain
authorization from the DSB in accordance with DSU procedures before suspending WTO tariff
concessions or other WTO obligations in the event the defending Member has failed to comply.
Compliance Issues
“Sequencing”
Although many WTO rulings have been satisfactorily implemented, difficult cases have tested
DSU implementation articles, highlighting deficiencies in the system and prompting suggestions
for reform. For example, gaps in the DSU have resulted in the problem of “sequencing,” which
first manifested itself in 1998-1999 during the compliance phase of the successful U.S. challenge
(...continued)
circumstances in the case were “serious enough” to permit it to do so. The arbitrator ultimately allowed Brazil to cross-
retaliate, but required that a variable annual threshold tied to the level of U.S. imports into Brazil be exceeded before
Brazil could exercise this option.
20 Nineteen Article 22.6 arbitral awards have been issued to date; a list of these awards is available at
http://www.worldtradelaw.net/reports/226awards/suspensionawards.asp. Of the 19 awards, two involve retaliation
requests by the United States (EC—Hormones (DS26) and EC—Bananas (DS27)), while 12 awards involve retaliation
requests by other WTO Members against the United States. The 12 awards involve disputes over five separate matters:
U.S.—“Foreign Sales Corporations” (DS108); U.S.—Antidumping Act of 1916 (DS136); U.S.—Continued Dumping
and Subsidy Offset Act (DS217/DS234); US—Cotton Subsidies (DS 267); and U.S.—Gambling Services (DS285). The
United States requested authorization to impose sanctions following the arbitral awards in both EC—Hormones and
EC—Bananas and imposed increased tariffs on EU goods in each; the continued imposition of U.S. sanctions in the
EC—Hormones case is discussed in the text at pages 9-11.
Sanctions were imposed against the United States in U.S.—“Foreign Sales Corporations” (U.S.—FSC) and U.S.—
Continued Dumping and Subsidy Offset Act (U.S.—CDSOA (Byrd Amendment)). Sanctions in U.S.—FSC, which had
been imposed and then suspended by the EU, were formally discontinued by the EU in 2006 following the repeal of a
“grandfather” provision contained in the American Jobs Creation Act, P.L. 108-357, legislation that had been enacted
in 2004 to comply with the WTO decision in the case. The “grandfather” provision was repealed in P.L. 109-222,
§ 513(b). The EU and Japan are continuing to impose sanctions in U.S.—CDSOA (Byrd Amendment); for recent
developments, see CRS Report RL32014, supra note 4.
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of the European Union’s banana import regime. Article 22 allows a prevailing party to request
authorization to retaliate within 30 days after a compliance period ends, while Article 21.5
provides that disagreements over the existence or adequacy of compliance measures are to be
decided using WTO dispute procedures, including resort to panels. A compliance panel’s report is
due within 90 days after the dispute is referred to it and may be appealed. The DSU does not
integrate the Article 21.5 procedure into the 30-day Article 22 deadline, nor does it expressly state
how compliance is to be determined so that a prevailing party may pursue retaliatory action under
Article 22.
Absent the adoption of multilateral rules on the matter, disputing parties have entered into ad hoc
procedural agreements in individual disputes under which compliance panel proceedings and
procedures involving retaliation requests, including the arbitration of retaliation proposals,
advance in sequence.21 Generally, Members agree that if a compliance panel finds that a Member
has not complied, the prevailing Member may proceed with its retaliation request even though the
30-day DSU deadline has passed.
Removal of Retaliatory Measures
The DSU is also silent on how authorized retaliation is to be terminated in the event a defending
Member believes that it has complied in a dispute. This issue was the subject of United States -
Continued Suspension of Obligations in the EC—Hormones Dispute (DS320), a dispute initiated
by the European Union (EU)22 against the United States in 2004 for continuing to maintain
increased (i.e., 100% ad valorem) tariffs on EU goods first imposed in 1999 in retaliation for the
EU’s failure to comply with the adverse WTO ruling on the EU’s ban on hormone-treated beef.
The EU also initiated a separate case against Canada on the same basis.23 The Appellate Body and
modified panel reports in the underlying beef hormone case, EC—Hormones,24 found that an EU
ban on imports of meat and meat products from cattle produced from six specific growth-
promotion hormones violated the Agreement on the Application of Sanitary and Phytosanitary
Measures (SPS Agreement); the reports were adopted by the WTO in February 1998.
Claiming that a 2003 European Union Directive rendered it WTO-compliant, the EU argued that
the United States and Canada were violating the following WTO obligations in continuing to
impose their retaliatory tariffs: (1) the GATT most-favored-nation article; (2) the GATT
21 Note, for example, the procedural agreement between the United States and Brazil in Brazil’s challenge of U.S.
cotton subsidies. Understanding between Brazil and the United States Regarding Procedures Under Articles 21 and 22
of the DSU and Article 4 of the SCM Agreement, United States—Subsidies on Upland Cotton, WT/DS267/22 (July 8,
2005). See generally Sylvia A. Rhodes, The Article 21.5/22 Problem: Clarification Through Bilateral Agreements? 3 J.
INT’L ECON. L. 553 (2000).
22 As of December 1, 2009, “European Union” replaced “European Communities” as the official name of this WTO
Member. The terms European Communities and EC still appear in older WTO materials, including panel and Appellate
Body reports, bilateral procedural agreements in particular disputes, and communications to the WTO Dispute
Settlement Body. Except for references to any such older WTO documents or other governmental materials using this
name, this report uses “European Union” or the acronym “EU” in the report text or notes regardless of the time period
being discussed. For further information, see European Union or Communities?, at http://www.wto.org/english/
thewto_e/countries_e/european_union_or_communities_popup.htm.
23 Canada—Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321.
24 European Communities—Measures Concerning Meat and Meat Products (Hormones), WT/DS26 (complaint by
United States); European Communities—Measures Affecting Livestock and Meat (Hormones), WT/DS48 (complaint by
Canada).
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prohibition on tariff surcharges; and (3) various DSU provisions, including Article 23, which
requires WTO Members to invoke WTO dispute settlement for disputes arising under WTO
agreements and precludes certain unilateral actions in trade disputes, and Article 22.8, which
permits sanctions to be imposed only until the defending Member’s WTO-inconsistent measures
have been removed or the dispute is mutually resolved.
In separate panel reports issued March 31, 2008, the WTO panel found that the EU was
maintaining bans on certain hormones without a sufficient scientific basis in violation of the SPS
Agreement, and that the United States and Canada had breached Article 23 requirements to resort
to WTO dispute settlement and to refrain from unilateral actions by (1) not initiating a WTO
proceeding to resolve the EU compliance issue and (2) determining unilaterally that the EU was
still in violation of the EC—Hormones decision. The panel also found, however, that to the extent
that the challenged EU measure had not been removed, the United States and Canada had not
violated Article 22.8, which requires that sanctions be removed once the offending measure is
withdrawn.25 The panel noted that it had functioned similarly to a compliance panel for the sole
purpose of determining whether Article 22.8 was violated and, because it did not have jurisdiction
to make a definitive determination in this regard, it suggested that the United States and Canada
initiate a compliance panel proceeding against the EU under Article 21.5 in order to comply with
their DSU obligations and to promptly resolve the dispute.
The Appellate Body, in separate reports issued October 16, 2008, reversed the panel’s findings
that the United States and Canada were in breach of the DSU as well as the panel’s findings that
the EU was still in violation of the SPS Agreement.26 Because the Appellate Body could not
complete the analysis needed to determine whether the contested EU measure had been
withdrawn, however, it recommended that the parties initiate an Article 21.5 compliance panel
proceeding to resolve their disagreement as to whether the EU is in compliance with the EC—
Hormones decision and thus whether the U.S. and Canadian countermeasures have a legal basis.
The AB and modified panel reports were adopted November 14, 2008.
The EU requested consultations under Article 21.5 in December 2008,27 but the proceeding
involving the United States has been suspended under a bilateral agreement. In a May 2009
memorandum of understanding (MOU) intended to resolve the underlying beef hormone dispute,
the United States and the EU agreed, inter alia, that the EU will expand market access for exports
of U.S. beef in three phases. In the first phase, the United States may maintain retaliatory tariffs
currently applied to EU products and will not impose the new duties that it announced in January
2009 under its “carousel” retaliation provision (see below). The two parties also agreed that they
will suspend WTO litigation (i.e., not request a compliance panel) for the first 18 months of the
25 Panel Report, United States - Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS320/R
(March 31, 2008); Panel Report, Canada - Continued Suspension of Obligations in the EC—Hormones Dispute,
WT/DS321/R (March 31, 2008). At the request of the disputing parties, panel proceedings in the case were opened to
the public via closed-circuit TV broadcast at the WTO, this being the first time that public access was permitted in a
WTO dispute settlement proceeding. Disputing parties have also agreed to public access of this type in several
subsequent disputes.
26 Appellate Body Report, United States—Continued Suspension of Obligations in the EC—Hormones Dispute,
WT/DS320/AB/R (October 16, 2008); Appellate Body Report, Canada—Continued Suspension of Obligations in the
EC—Hormones Dispute, WT/DS321/AB/R (October 16, 2008).
27 Press Release, European Commission, EU requests WTO consultations concerning WTO-compliance of its
restrictions on hormone-treated beef and WTO inconsistency of continued US and Canadian trade sanctions (December
22, 2008), at http://ec.europa.eu/trade/issues/respectrules/dispute/pr221208_en.htm.
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agreement.28 The USTR delayed the imposition of the additional duties on new items until
September 19, 2009, and officially terminated these duties as of this date.29 As a result of these
actions, the duties were never imposed.
WTO Dispute Settlement and U.S. Law
Legal Effect of WTO Decisions
The adoption by the WTO Dispute Settlement Body of a panel and, if appealed, subsequent
Appellate Body report finding that a U.S. law, regulation, or practice violates a WTO agreement
does not give the report or reports direct legal effect in this country. Thus, federal law is not
affected until Congress or the executive branch, as the case may be, changes the law or
administrative measure at issue.30 Procedures for executive branch compliance with adverse
decisions are set out in §§ 123(g) and 129 of the Uruguay Round Agreements Act, P.L. 103-465,
19 U.S.C. §§ 3533(g), 3538. Only the federal government may bring suit against a state or
locality to declare a state or local law invalid because of inconsistency with a WTO agreement;
private remedies based on WTO obligations are also precluded.31 Federal courts have held that
WTO panel and Appellate Body reports are not binding on the judiciary32 and have treated
determinations involving “whether, when, and how” to comply with a WTO decision as falling
within the province of the executive rather than the judicial branch.33
Section 301 of the Trade Act
Sections 301-310 of the Trade Act of 1974 (referred to collectively as Section 301), 19 U.S.C. §§
2411 et seq., provide a mechanism for private parties to petition the United States Trade
Representative (USTR) to take action regarding harmful foreign trade practices. If the USTR
28 Press Release, Office of the USTR, USTR Announces Agreement with European Union in Beef Hormones Dispute
(updated June 22, 2009), at http://www.ustr.gov/about-us/press-office/press-releases/2009/may/ustr-announces-
agreement-european-union-beef-hormones-; European Commission, Memorandum on Beef Hormones dispute signed
with the United States (May 14, 2009), at http://ec.europa.eu/trade/issues/respectrules/dispute/memo140509_en.htm.
29 At the time of the May 2009 agreement, some products had been removed from the list of covered items pursuant to
the USTR’s January 2009 announcement. While the Office of the USTR ultimately delayed the effective date of the
additional duties on new products until September 19, 2009, the removal of items announced in January became
effective as of March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74
Fed. Reg. 40864 (August 13, 2009). The United States officially terminated the additional duties on new items on
September 19, 2009, leaving in place the additional duties on the reduced list of products that had been in force since
March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74 Fed. Reg. 48808
(September 24, 2009).
30 See Uruguay Round Agreements Act Statement of Administrative Action, H.Doc. 103-316, vol. 1, at 1032-33.
Uruguay Round implementing legislation states that “[n]o provision of any of the Uruguay Round Agreements, nor the
application of any such provision to any person or circumstance, that is inconsistent with any law of the United States
shall have effect.” Uruguay Round Agreements Act (URAA), P.L. 103-465, § 102(a)(1); see also H.Rept. 103-826, Pt.
I, at 25.
31 URAA, P.L. 103-465, § 102(b), (c).
32 E.g., Corus Staal BV v. Department of Commerce, 395 F.3d 1343 (Fed. Cir. 2005), cert. denied, 126 S.Ct. 1023
(2006); see generally CRS Report RS22154, World Trade Organization (WTO) Decisions and Their Effect in U.S. Law,
by Jeanne J. Grimmett.
33 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008).
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decides to initiate an investigation regarding a foreign measure that allegedly violates a WTO
agreement, the USTR must invoke the WTO dispute process to seek resolution of the problem.34
Section 301 authorizes the USTR to impose retaliatory measures to remedy an uncorrected
foreign practice, some of which may involve suspending a WTO obligation—for example,
imposing a tariff increase on a product in excess of the rate negotiated in the WTO or the “bound”
rate. The USTR may terminate a Section 301 case if the dispute is settled, but, under § 306 of the
act, the USTR must monitor foreign compliance and may take further retaliatory action if
compliance measures are unsatisfactory. While Section 301 also permits the USTR to initiate an
investigation on its own motion, it is not necessary for the USTR to invoke Section 301 in order
to initiate a WTO dispute. Nevertheless, the authorities in Section 301 are available to the USTR
if it decides to impose sanctions in a WTO dispute that it initiated earlier.
If the USTR has taken action against the goods of another country for its failure to comply with a
WTO decision, § 306(b)(2)(B)-(F), of the Trade Act, 19 U.S.C. § 2416(b)(2)(B)-(F), directs the
USTR periodically to revise the list of imported products subject to retaliation, unless the USTR
finds that implementation of WTO obligations is imminent or the USTR and the petitioner agree
that revision is unnecessary. This authority to rotate the products subject to retaliatory action is
often referred to as “carousel retaliation.” The European Union filed a WTO complaint
challenging the statutory provision shortly after its enactment in 2000, alleging that the statute
mandates unilateral action and the taking of retaliatory action other than that which had been
authorized by the WTO in violation of the DSU.35 Because the United States had not invoked the
provision, the EU refrained from seeking a panel in the case.
In December 2008, however, the United States exercised “carousel” authorities to propose
modifications to the list of EU products subject to the WTO-authorized tariff surcharges that it
had originally imposed in EC—Hormones, discussed earlier. A final modified list was published
in January 2009.36 Originally applicable to all covered goods entering the United States on or
after March 23, 2009, the revisions include removal of some products from the original list of
covered products, the addition of new products to the list, modified coverage with regard to
certain EU member states, and an increase to 300% ad valorem of duties on one product,
Roquefort cheese. The EU announced on January 15, 2009, that it had decided to “start
preparations” to pursue WTO dispute settlement regarding the carousel statute, stating that it
“breaches the WTO requirement of equivalence between the damage caused by the sanction or
34 Most recently, the United States Trade Representative, in response to a petition filed by a labor union in September
2010, initiated an investigation with respect to acts, policies, and practices of the People’s Republic of China involving
trade and investment in green technology, focusing on whether any of these measures deny U.S. rights or benefits
under the General Agreement on Tariffs and Trade 1994 (GATT 1994), the WTO Agreement on Subsidies and
Countervailing Measures (SCM Agreement), or China’s WTO Accession Protocol. Initiation of Section 302
Investigation and Request for Public Comment: China—Acts, Policies and Practices Affecting Trade and Investment in
Green Technology, 75 Fed. Reg. 64776 (October 20, 2010). In late December 2010, the United States initiated a
dispute in the WTO involving one of the measures cited in the petition, claiming, inter alia, that China has violated
obligations in the SCM Agreement by providing subsidies on wind power equipment under its Wind Power Equipment
Fund that are contingent upon the use of domestic over imported products and, as such, are prohibited under Article
3.1(b) of the SCM Agreement. Request for Consultations by the United States, China—Measures Concerning Wind
Power Equipment, WT/DS419/R (January 6, 2011); see also WTO Dispute Settlement Proceeding Regarding China—
Subsidies on Wind Power Equipment, 75 Fed. Reg. 82130 (December 29, 2010).
35 Request for Consultations by the European Communities, United States—Section 306 of the Trade Act of 1974 and
Amendments Thereto, WT/DS200/1 (June 13, 2000).
36 Modification of Action Taken in Connection with WTO Dispute Settlement Proceedings on the European
Communities’ Ban on Imports of U.S. Beef and Beef Products, 74 Fed. Reg. 4265 (January 23, 2009).
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ban and the retaliation proposed.”37 As noted above, under an MOU with the EU aimed at settling
the beef hormone dispute, the United States has agreed not to impose the announced tariff
increases on new items and officially terminated these additional duties as of September 19,
2009.38
The EU filed a broader challenge to Section 301 in 1998 based on various obligations in Article
23 of the DSU, which, as noted earlier, precludes certain unilateral actions in trade disputes
involving WTO agreements. Section 301 may generally be used consistently with the DSU,
though some U.S. trading partners have complained that the statute allows unilateral action and
forces negotiations through its threat of sanctions. In United States—Sections 301-310 of the
Trade Act of 1974 (DS152), the WTO panel found that the language of § 304, which requires the
USTR to determine the legality of a foreign practice by a given date, is prima facie inconsistent
with Article 23 because in some cases it mandates a USTR determination—and statutorily
reserves a right for the USTR to determine that a practice is WTO-inconsistent—before DSU
procedures are completed.39 The panel also found, however, that the serious threat of violative
determinations and consequently the prima facie inconsistency was removed because of U.S.
undertakings, as set forth in the Uruguay Round Statement of Administrative Action (H.Doc. 103-
316), a document submitted to Congress along with the Uruguay Round agreements, and U.S.
undertakings made before the panel, that the USTR would use its statutory discretion to
implement Section 301 in conformity with WTO obligations. Moreover, the panel could not find
that the DSU was violated by § 306 of the Trade Act of 1974, which directs USTR to make a
determination as to imposing retaliatory measures by a given date, given differing good faith
37 Press Release, European Commission, EU Prepares WTO action over US trade sanction law (January 15, 2009), at
http://ec.europa.eu/trade/issues/respectrules/dispute/pr150109_en.htm. Article 22.4 of the DSU provides that “the level
of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the
nullification or impairment.” The “carousel” issue has also been raised by the EC in Doha Round dispute settlement
negotiations. Dispute Settlement Body, Special Session, Contribution of the European Communities and Its Member
States to the Improvement of the WTO Dispute Settlement Understanding, at 6, TN/DS/W/1 (March 13, 2002).
38 See supra note 29 and accompanying text. The continued imposition of the beef hormone sanctions by the USTR on
toasted bread products from Spain was successfully challenged in Gilda Industries v. United States, 625 F.Supp.2d
1377 (Ct. Int’l Trade 2009), on the ground that the sanctions had expired by operation of law in late July 2007. The
sanctions were challenged in the U.S. Court of International Trade, the specialized federal trade court located in New
York City. The United States appealed the decision to the U.S. Court of Appeals for the Federal Circuit, which
affirmed the lower court judgment on October 13, 2010. Gilda Industries v. United States, No. 2009-1492, 2010 WL
3987360 (Fed. Cir. 2010), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/09-1492.pdf.
While the United States may appeal the decision to the U.S. Supreme Court, the Court grants only a small number of
petitions for certiorari and, in general, hears relatively few trade cases.
Gilda Industries involves the interpretation of statutory requirements contained in section 307(c)(1) of the Trade Act of
1974, 19 U.S.C. § 2417(c)(1), which provides that if “a particular action” has been taken by the USTR under Section
301 during any four-year period, for example, the imposition of increased tariffs on the products of a foreign country,
and neither the petitioner in the Section 301 case nor any representative of the domestic industry which benefits from
the action has submitted to the USTR during the last 60 days of the four-year period a written request for the
continuation of the action, the action is to terminate at the end of the four-year period. It was alleged in the case that the
operative four-year period for the beef hormone sanctions began at the end of July 2003 and that no request was made
to continue the sanctions during the final 60 days of this period. The U.S. Court of International Trade found that the
retaliatory measures terminated by operation of law on July 29, 2007, absent a timely petitioner or industry request,
neither of which had occurred. The court ordered the U.S. Department of Customs and Border Protection to refund to
the plaintiff all retaliatory duties collected on its imported products between July 29, 2007, and March 23, 2009, the
date these items were officially removed from the list of goods subject to the increased tariffs.
39 Panel Report, United States—Sections 301-310 of the Trade Act of 1974, WT/DS152/R (December 22, 1999).
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interpretations of the “sequencing” ambiguities in the DSU. The panel report, which was not
appealed, was adopted in January 2000.40
111th Congress Legislation
Legislation introduced in the 111th Congress generally reflected congressional concerns that the
executive branch had not challenged restrictive foreign trade practices in the WTO to a sufficient
degree and that, where WTO decisions were adverse to the United States, the executive branch
had too readily used existing statutory authorities to comply with these decisions, particularly
where U.S. trade remedies were involved. A particular concern was U.S. compliance with WTO
decisions faulting the use of “zeroing,” a practice employed by the Department of Commerce in
antidumping proceedings to determine the applicable dumping margin, that is, the amount by
which the price of an import when sold in the United States falls below the fair value of the
product, generally the price in the exporting country. The amount of antidumping duties finally
imposed on an imported product is based on this margin. “Zeroing” is a practice under which
sales above fair value are disregarded or given a “zero” value, thus allowing the dumping margin
to be determined solely on the basis of less than fair value sales and, as alleged by some,
improperly inflating the dumping margin. The Commerce Department abandoned the use of
“zeroing” in original antidumping investigations in early 2007 and, in late December 2010,
proposed modifications in its use in subsequent phases of U.S. antidumping proceedings.41
H.R. 496 (Rangel) would have created an Office of the Congressional Trade Enforcer (CTE),
which, inter alia, would have investigated restrictive foreign trade practices in light of WTO
obligations and called on the United States Trade Representative (USTR) to initiate WTO dispute
proceedings where the CTE found that practices violated such obligations; expressed
congressional dissatisfaction with WTO dispute settlement decisions finding that the U.S. practice
of “zeroing” violates the WTO Antidumping Agreement and with decisions of the WTO
Appellate Body generally; and placed restrictions on the Department of Commerce in
40 The European Union also cited Article 23 of the DSU in United States—Import Measures on Certain Products from
the European Communities (DS165), a case in which the EU challenged a measure taken by the United States in the
compliance phase of a trade dispute in the WTO between the two Members. Here, the EU argued that the temporary
imposition by the United States of increased bonding requirements on certain EU imports was a violation of, among
other DSU and GATT articles, Article 23.1(c) of the DSU, which prohibits a WTO Member from suspending WTO
tariff concessions or other obligations in a WTO dispute before being authorized by the DSB to do so. In this case, the
United States had imposed the bonding requirement before the issuance of an arbitral report on the level of retaliation
that the United States had proposed in response to the EU’s failure to comply with the adverse WTO decision on the
EU banana import regime (DS27), and therefore before obtaining authorization from the DSB to suspend concessions
in the case. While the WTO Appellate Body reversed several of the panel’s findings, it left intact the panel’s conclusion
that the U.S. measure violated Article 23.1(c), a panel finding that had not been appealed by the United States. At the
same time, because the bonding requirement had expired and had thus been removed by the time that the panel in the
EC challenge had issued its report, the WTO Appellate Body criticized the panel for recommending that the United
States bring its measure into conformity with WTO obligations. Panel Report, United States—Import Measures on
Certain Products from the European Communities, WT/DS165/R (July 17, 2000); Appellate Body Report, United
States—Import Measures on Certain Products from the European Communities, WT/DS165/AB/R (December 11,
2000). See also Implementation of WTO Recommendations Concerning the European Communities’ Regime for the
Importation, Sale and Distribution of Bananas, 64 Fed. Reg. 19209 (April 19, 1999). For additional discussion of both
DS152 and DS165, see John H. Jackson and Patricio Grane, The Saga Continues: An Update on the Banana Dispute
and its Procedural Offspring, 4 J. INT’L ECON. L. 581 (2001).
41 Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin and Assessment Rate in Certain
Antidumping Duty Proceedings, 75 Fed. Reg. 81533 (December 28, 2010).
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implementing the revised zeroing practice that it adopted in 2007 in response to adverse WTO
decisions.
S. 363 (Snowe) would have given the U.S. Court of International Trade, the specialized federal
trade court based in New York City, exclusive jurisdiction to review de novo certain USTR
determinations under Section 301 of the Trade Act of 1974, including in some cases
determinations that might have involved the initiation and conduct of WTO disputes, and would
have amended various Section 301 authorities themselves.
S. 1466 (Stabenow) and S. 1982 (Brown) would have established mechanisms under the Trade
Act of 1974 requiring the USTR to identify particularly harmful foreign trade practices and,
where appropriate, to initiate WTO cases to remedy these practices.
Author Contact Information
Jeanne J. Grimmett
Legislative Attorney
jgrimmett@crs.loc.gov, 7-5046
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