WTO backs US sanctions law By Neil Buckley in Brussels and Mark Suzman in Washington
A World Trade Organisation disputes panel has ruled that controversial US legislation used by Washington as the basis for imposing sanctions in trade disputes does not violate world trade rules. But, in an important rider to its conclusion, it warned that the US must not use the legislation in a way that would be inconsistent with the WTO's disputes settlement system.
Both the EU, which launched the case, and the US last night claimed that the ruling vindicated their positions. But the US is not required to change its legislation as a result.
The EU had complained that the so-called Section 301 legislation - in fact sections 301 to 310 of the US Trade Act - breached WTO rules. The legislation has been used as the basis for hundreds of millions of dollars of US sanctions imposed on the EU after disputes over bananas and hormone-treated beef.
The EU - backed by 16 other countries which joined the case as third parties - argued that the US law called for unilateral action by the US in a way that was inconsistent with the WTO's arrangements for multilateral settlement of disputes.
The WTO panel ruled that one element of the law, section 304, was prima facie a violation of world trade rules. This required the US Trade Representative to determine whether US rights under the WTO have been denied within 180 days of a request for WTO consultations - even though the full disputes settlement procedure may not have had time to run its course.
The panel said this meant there was a serious threat of unilateral action being taken, likening this to a "big stick".
"Merely carrying a big stick is, in many cases, as effective a means to having one's way as actually using the stick," it said.
But the panel said that since other statements and undertakings by the US administration adopted by Congress limited the USTR's discretion to take unilateral action before WTO disputes procedures were completed, that prima facie threat was removed.
The panel concluded that 301 as it stood was consistent with WTO rules. But it warned that its findings depended on the additional undertakings by the US administration. If these were ever repudiated or ignored, its conclusions would no longer be valid.
US trade officials welcomed the decision. Charlene Barshefsky, the US Trade representative, said the WTO panel had ruled that the US had always acted in accord with its WTO obligations whenever it had used the statute to assert its international trade rights.
"Section 301 has served and will continue to serve, as a cornerstone of our efforts to enforce our international trade rights."
A spokesman for Pascal Lamy, EU trade commissioner, said the decision was an "important clarification of the rules of the multilateral trading system".
"Unilateral action is out and WTO rules and procedures have to be followed," he added.