August 28, 2018
U.S. Trade Debates: Select Disputes and Actions
Introduction
disputes. As part of the dispute settlement process, WTO
Over the past 18 months, the United States and some of its
members may seek authorization to retaliate if trading
major trading partners have engaged in a contentious “war”
partners maintain measures determined to be inconsistent
of words over trade—one that has recently tipped over into
with WTO rules.
action, mostly in the form of increased tariffs. The tariffs
Select Major U.S. Trade Disputes Prior
imposed by the Trump Administration, combined with
to the Trump Administration
retaliatory measures adopted by other countries, are
Below is a historic overview of 10 “controversial” U.S.
reportedly having noticeable effects on trade flows and U.S.
trade disputes. These cases demonstrate that since the
businesses. Although the scale and scope of these recent
creation of the GATT in 1947, the United States has, for the
unilateral U.S. tariff increases are unprecedented in modern
most part, entered into negotiations to reduce trade barriers
times, tensions and irritants in international trade relations
and has imposed unilateral, restrictive trade measures in
are not uncommon. Over the last 100 years, the United
limited instances.
States has been involved in a number of significant trade
disputes. According to the World Trade Organization
“Smoot-Hawley” Tariff Act (1930)
(WTO), as of August 2018, the United States is currently
The Tariff Act of 1930, commonly known as the Smoot-
involved in 271 active trade disputes being addressed in the
Hawley Tariff Act, is recognized by economists as having
WTO dispute settlement system—either as complainant or
triggered a global “trade war”—one that deepened the Great
as a respondent. Most disputes are settled, or when
Depression. Originally meant to help heavily indebted
unresolved, are contained or defused through bilateral and
farmers hit by falling commodity and land prices, the Act’s
multilateral negotiations. From the early 20th century until
scope was eventually expanded to include thousands of
this year, only one resulted in a worldwide tit-for-tat
products from numerous sectors. While the United States
escalation of tariffs: the trade dispute ignited by the U.S.
reduced its import dependence, other countries retaliated
Smoot-Hawley Tariff Act of 1930.
with increased tariffs on their imports, and by 1933, U.S.
exports had declined by at least 60%. GATT negotiations
eventually reduced tariffs on a multilateral basis.
U.S.-EU “Chicken War” (1962)
The dispute, known as the “Chicken War,” began in 1962,
when the European Economic Community (EEC, a
predecessor to the European Union, EU) sharply raised its
common external tariff on poultry. The United States
retaliated in 1963 after consultations with the EEC failed to
resolve the dispute and a GATT dispute panel of experts
had convened. The United States raised tariffs on potato
starch, brandy, dextrine, and light trucks. The truck tariff
(25%)—still in place today—applies to all U.S. truck
imports, unless reduced or phased out by a U.S. free trade
Source:
agreement.
CRS with data from the World Trade Organization (Aug. 20, 2018).
Addressing U.S. Trade Disputes
U.S.-Japan Trade Conflicts of the 1980s
As the Japanese economy along with its auto industry took
The United States has used unilateral measures and has
off, trade tensions between Japan and the United States
engaged with trading partners in bilateral and multilateral
escalated significantly during the early 1980s. In an effort
fora to address trade-related concerns. U.S. federal statutes
to persuade Congress not to legislate retaliatory measures,
provide for trade remedy measures to address potential
both countries held intense bilateral consultations and
adverse effects (i.e., material injury or threat thereof) on
reached agreements to try to improve market access for
domestic industry of “unfair” foreign trade practices, such
U.S. products and limit auto imports. They negotiated
as antidumping (AD) and countervailing duties (CVD), or
several voluntary export restraint agreements, which
to reduce the flow of fairly-traded imports that threaten to
required Japan to limit its auto (and steel) exports to the
impair U.S. national security or cause serious injury or
United States. Japan also agreed to increase U.S. imports
threat thereof (safeguard measures). In addition, the United
and eliminate barriers to U.S. firms operating in Japan.
States has conducted bilateral discussions with many of its
(Note that the 1995 WTO Agreement on Safeguards banned
trading partners to manage frictions over discrete issues and
the use of informal measures like voluntary export restraint
achieve expanded market access for U.S. firms. More often,
arrangements.)
however, the United States has resorted to the multilateral
forum provided by the WTO or its predecessor, the General
U.S.-Canada Softwood Lumber Dispute (1980s)
Agreement on Tariffs and Trade (GATT), to settle trade
Since the 1980s, there have been five major disputes or
“lumber wars” between the United States and Canada. The
https://crsreports.congress.gov
U.S. Trade Debates: Select Disputes and Actions
U.S. softwood lumber industry has alleged since 1982 that
Steel Tariffs (2002)
the Canadian lumber exporters benefit from unfair
Between 1997 and 2001, companies representing about
subsidies. After intense negotiations, in 1986 the United
one-third of all U.S. steel capacity fell into bankruptcy. The
States and Canada concluded the first of several agreements
U.S. International Trade Commission (ITC) conducted a
addressing the dispute. Subsequent agreements have been
safeguard investigation and determined that surging steel
reached and since expired, but negotiations on the subject
imports had caused serious injury. In response, in 2002 the
remain ongoing at WTO and North America Free Trade
Bush Administration imposed tariffs against some steel
Agreement tribunals.
imports. The measures were scheduled to be phased down
Select Barriers to Market Access
each year and to be abolished by 2005. Trading partners
protested the measures and pursued WTO action. The WTO
Tariffs: customs duties on merchandise imports.
concluded that certain aspects of the U.S. measures were
Nontariff Barriers: measures in a form other than a tariff.
inconsistent with U.S. WTO obligations, and in December
Quotas: limits on the quantity or value of goods that can
2003, the Bush Administration terminated the safeguards.
be imported (or exported) during a specific time period.
Boeing-Airbus Subsidy Dispute (2004)
Technical Barriers to Trade: technical regulations,
The United States and the EU have long claimed that the
standards, and testing and certification procedures.
other either directly or indirectly subsidizes their domestic
Sanitary and Phytosanitary Measures: measures
civil aircraft industries, embodied in Boeing and Airbus,
dealing with food safety and animal and plant health.
respectively. Following intense negotiations, in 1992 both
sides concluded a deal placing limits on government
Import Licensing Systems: administrative procedures
subsidies affecting the aircraft industry. Citing
for obtaining a permit for importing a product.
dissatisfaction with EU compliance, in 2004 the United
Source: World Trade Organization, A Guide to “WTO Speak,” 2018.
States resorted to the WTO dispute settlement system and
U.S.-EU Beef Hormone Dispute (1989)
withdrew from the agreement. In 2018, the WTO Appellate
The United States and the EU have engaged in a long-
Body issued a final decision in favor of the United States,
standing dispute over the EU’s decision to ban hormone-
which upheld a 2016 ruling that the EU had not eliminated
treated meat. In response to a 1989 EU ban, the United
illegal state aid to Airbus. A final decision is pending on
States imposed tariffs on some EU imports. In 1996, both
whether the United States has complied with a previous
sides took the issue to the WTO, where a dispute settlement
WTO ruling to address U.S. subsidies through tax breaks.
panel ruled that the ban was inconsistent with WTO rules.
Chinese Tire Dispute (2009)
When the EU failed to implement the panel’s
Between 2004 and 2008, U.S. imports of Chinese tires more
recommendations, the United States obtained WTO
than tripled. In 2009, the ITC conducted a special China-
authorization to retaliate against EU imports. Since 2009, a
specific safeguard investigation and determined that
number of bilateral agreements have been reached under
imports of certain tires from China were harming U.S. tire
which the EU creates duty-free quotas for imports of
producers. In response, the Obama Administration
specially-produced beef, in exchange for the elimination of
increased tariffs for three years on imports of certain
increased U.S. tariffs on EU imports.
Chinese tires. China challenged the U.S. duties at the WTO,
U.S.-China Intellectual Property Rights (IPR) and
but the dispute settlement panel found that the United States
Market Access Disputes of the 1990s
had acted consistently with its WTO obligations. China
As the volume of U.S.-China trade grew substantially
later imposed ADs and CVDs against certain U.S. autos, a
between the late 1980s and early 1990s, the United States
move many believe was in retaliation to the tire dispute.
increasingly raised concerns about IPR infringement in
Issues for Congress
China. In 1991, the U.S. Trade Representative designated
The above cases highlight that past trade disputes were
China as a Special 301 “Priority Foreign Country” and
more narrowly focused across products and trading
threatened it with significant retaliation. Between 1991 and
partners, settled or diffused through negotiations, and
1994, the both sides negotiated agreements committing
generally transient in nature. Since the establishment of the
China to taking steps to strengthen its IPR enforcement
WTO, the United States has generally pursued bilateral and
regime and adopt more market-opening measures.
multilateral negotiations to address trade concerns, as well
“Battle of the Bananas” (1990s)
as WTO dispute settlement. While some Members of
During the 1990s, the EU banana import regime was a
Congress may welcome the unilateral actions by the Trump
primary source of U.S.-EU trade tension. The regime,
Administration or call for an even more active use of trade
instituted in 1993, granted preferential treatment to bananas
restrictive measures, others may see it as an undesirable
from producers in the EU and former European colonies,
shift in U.S. trade policy. In either case, Congress could
which adversely affected U.S. banana firms. Following
consider amending delegated authorities to the President
unsuccessful bilateral consultations, the United States
under U.S. trade laws. It could also require congressional
pursued the WTO dispute settlement process. In 1997, the
consultation or approval before new trade barriers are
WTO found that the EU regime was incompatible with the
imposed, or request an economic impact study of how
EU’s WTO obligations. By 1999, as the EU had not
major trade actions may affect the U.S. economy, disrupt
implemented the WTO recommendations, the United States
global supply chains, and weaken global trade rules.
received authorization from the WTO to retaliate against
EU imports. In 2001, both sides agreed to reform the EU
Andres B. Schwarzenberg, Analyst in International Trade
banana regime and lift the U.S. retaliatory duties.
and Finance
IF10958
https://crsreports.congress.gov
U.S. Trade Debates: Select Disputes and Actions
Disclaimer
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https://crsreports.congress.gov | IF10958 · VERSION 2 · NEW