Updated July 11, 2019
U.S. Trade Debates: Select Disputes and Actions
Introduction
members may seek authorization to retaliate if trading
Since 2017, the United States and some of its major trading
partners maintain measures determined to be inconsistent
partners have engaged in a contentious “war” of words over
with WTO rules.
trade—one that tipped over into action in February 2018,
Select Major U.S. Trade Disputes Prior
mostly in the form of increased tariffs. The tariffs imposed
to the Trump Administration
by the Trump Administration, combined with retaliatory
Below is a historic overview of 10 “controversial” U.S.
measures adopted by other countries, are reportedly having
trade disputes. These cases demonstrate that since the
noticeable effects on trade flows and U.S. firms. Although
creation of the GATT in 1947, the United States has, for the
the scale and scope of these recent unilateral U.S. tariff
most part, entered into negotiations to reduce trade barriers
increases are unprecedented in modern times, tensions and
and has imposed unilateral, restrictive trade measures in
irritants in international trade relations are not uncommon.
limited instances.
Over the last 100 years, the United States has been involved
“Smoot-Hawley” Tariff Act (1930)
in a number of trade disputes. According to the World
The Tariff Act of 1930, commonly known as the “Smoot-
Trade Organization (WTO), as of July 2019, the United
Hawley” Tariff Act, is recognized by economists as having
States is currently involved in 278 active trade disputes
triggered a global “trade war”—one that deepened the Great
being addressed in the WTO dispute settlement system—
Depression. Originally meant to help heavily indebted
either as complainant or as a respondent. Most disputes are
farmers hit by falling commodity and land prices, the Act’s
settled, or when unresolved, are contained or defused
scope was eventually expanded to include thousands of
through bilateral and multilateral negotiations. From the
products from numerous sectors. While the United States
early 20th century until this year, only one resulted in a
reduced its import dependence, other countries retaliated
worldwide tit-for-tat escalation of tariffs: the trade dispute
with increased tariffs on their imports, and by 1933, U.S.
ignited by the U.S. “Smoot-Hawley” Tariff Act of 1930.
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
agreement (FTA).
Source: CRS with data from the World Trade Organization (July 10, 2019).
U.S.-Japan Trade Conflicts of the 1980s
Addressing U.S. Trade Disputes
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 (VER) 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 VER arrangements.)
achieve expanded market access for U.S. firms. More often,
U.S.-Canada Softwood Lumber Dispute (1980s)
however, the United States has resorted to the multilateral
Since the 1980s, there have been five major disputes or
forum provided by the WTO or its predecessor, the General
“lumber wars” between the United States and Canada. The
Agreement on Tariffs and Trade (GATT), to settle trade
U.S. softwood lumber industry has alleged since 1982 that
disputes. As part of the dispute settlement process, WTO
the Canadian lumber exporters benefit from unfair
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U.S. Trade Debates: Select Disputes and Actions
subsidies. After intense negotiations, in 1986 the United
imports had caused serious injury. In response, in 2002 the
States and Canada concluded the first of several agreements
Bush Administration imposed tariffs against some steel
addressing the dispute. Subsequent agreements have been
imports. The measures were scheduled to be phased down
reached and since expired, but negotiations on the subject
each year and to be abolished by 2005. Trading partners
remain ongoing at WTO and North America Free Trade
protested the measures and pursued WTO action. The WTO
Agreement (NAFTA) tribunals.
concluded that certain aspects of the U.S. measures were
Select Barriers to Market Access
inconsistent with U.S. WTO obligations, and in December
Tariffs: customs duties on merchandise imports.
2003, the Bush Administration terminated the safeguards.
Nontariff Barriers: measures in a form other than a tariff.
Boeing-Airbus Subsidy Dispute (2004)
The United States and the EU have long claimed that the
Quotas: limits on the quantity or value of goods that can
be imported (or exported) during a specific time period.
other either directly or indirectly subsidizes their domestic
civil aircraft industries, embodied in Boeing and Airbus,
Technical Barriers to Trade: technical regulations, standards,
respectively. Following intense negotiations, in 1992 both
and testing and certification procedures.
sides concluded a deal placing limits on government
Sanitary and Phytosanitary Measures: measures dealing
subsidies affecting the aircraft industry. Citing
with food safety and animal and plant health.
dissatisfaction with EU compliance, in 2004 the United
Import Licensing Systems: administrative procedures for
States resorted to the WTO dispute settlement system and
obtaining a permit for importing a product.
withdrew from the agreement. In 2018, the WTO Appellate
Source: World Trade Organization, A Guide to “WTO Speak,” 2018.
Body (AB) issued a final decision in favor of the United
U.S.-EU Beef Hormone Dispute (1989)
States, which upheld a 2016 ruling that the EU had not
The United States and the EU have engaged in a long-
eliminated illegal state aid to Airbus. Earlier this year, the
standing dispute over the EU’s decision to ban hormone-
AB determined that the United States also had not complied
treated meat. In response to a 1989 EU ban, the United
with a previous WTO ruling to address U.S. subsidies
States imposed tariffs on some EU imports. In 1996, both
through tax breaks. The WTO has yet to estimate the harm
sides took the issue to the WTO, where a dispute settlement
caused by both sides’ illegal subsidies and authorize any
panel ruled that the ban was inconsistent with WTO rules.
countermeasures that they can impose, but a decision is
When the EU failed to implement the panel’s
expected in the U.S. case against the EU later in 2019. The
recommendations, the United States obtained WTO
United States has indicated that it might retaliate against up
authorization to retaliate against EU imports. Since 2009, a
to $25 billion worth of EU imports.
number of bilateral agreements have been reached under
Chinese Tire Dispute (2009)
which the EU creates duty-free quotas for imports of
Between 2004 and 2008, U.S. imports of Chinese tires more
specially-produced beef, in exchange for the elimination of
than tripled. In 2009, the ITC conducted a special China-
increased U.S. tariffs on EU imports.
specific safeguard investigation and determined that
U.S.-China Intellectual Property Rights (IPR) and
imports of certain tires from China were harming U.S. tire
Market Access Disputes of the 1990s
producers. In response, the Obama Administration
As the volume of U.S.-China trade grew substantially
increased tariffs for three years on imports of certain
between the late 1980s and early 1990s, the United States
Chinese tires. China challenged the U.S. duties at the WTO,
increasingly raised concerns about IPR infringement in
but the dispute settlement panel found that the United States
China. In 1991, the U.S. Trade Representative designated
had acted consistently with its WTO obligations. China
China as a Special 301 “Priority Foreign Country” and
later imposed ADs and CVDs against certain U.S. autos, a
threatened it with significant retaliation. Between 1991 and
move many believe was in retaliation to the tire dispute.
1994, the both sides negotiated agreements committing
Issues for Congress
China to taking steps to strengthen its IPR enforcement
The above cases highlight that past trade disputes were
regime and adopt more market-opening measures.
more narrowly focused across products and trading
“Battle of the Bananas” (1990s)
partners, settled or diffused through negotiations, and
During the 1990s, the EU banana import regime was a
generally transient in nature. Since the establishment of the
primary source of U.S.-EU trade tension. The regime,
WTO, the United States has generally pursued bilateral and
instituted in 1993, granted preferential treatment to bananas
multilateral negotiations to address trade concerns, as well
from producers in the EU and former European colonies,
as WTO dispute settlement. While some Members of
which adversely affected U.S. banana firms. Following
Congress may welcome the unilateral actions by the Trump
unsuccessful bilateral consultations, the United States
Administration or call for an even more active use of trade
pursued the WTO dispute settlement process. In 1997, the
restrictive measures, others may see it as an undesirable
WTO found that the EU regime was incompatible with the
shift in U.S. trade policy. In either case, Congress could
EU’s WTO obligations. By 1999, as the EU had not
consider amending delegated authorities to the President
implemented the WTO recommendations, the United States
under U.S. trade laws. It could also require congressional
received authorization from the WTO to retaliate against
consultation or approval before new trade barriers are
EU imports. In 2001, both sides agreed to reform the EU
imposed, or request an economic impact study of how
banana regime and lift the U.S. retaliatory duties.
major trade actions may affect the U.S. economy, disrupt
Steel Tariffs (2002)
global supply chains, and weaken global trade rules.
Between 1997 and 2001, companies representing about
one-third of all U.S. steel capacity fell into bankruptcy. The
Andres B. Schwarzenberg, Analyst in International Trade
U.S. International Trade Commission (ITC) conducted a
and Finance
safeguard investigation and determined that surging steel
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U.S. Trade Debates: Select Disputes and Actions
IF10958
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https://crsreports.congress.gov | IF10958 · VERSION 3 · UPDATED