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World Trade Organisation (WTO) Rules and Dispute Settlement

Crucially, the WTO provides for the effective enforcement of its rules and agreements through a Dispute Settlement system, the results of which are binding on all parties. It provides for consultations, Panels and if necessary, Appellate Body proceedings. WTO members have agreed that if they believe fellow members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. This means abiding by the agreed procedures and respecting rulings.

The rules are set out in the WTO Dispute Settlement Understanding (DSU). The DSU emphasises that prompt settlement of disputes is essential if the WTO is to function effectively. It sets out in considerable detail the procedures and timetables to be followed in resolving disputes. If a case runs its full course to a first ruling, it should not normally take more than about one year - 15 months if the case is appealed.  However, in complex cases (e.g. the disputes involving Airbus and Boeing and the GMO dispute) the timetables prove to be considerably longer.

Rulings are automatically adopted unless there is a consensus to reject a ruling - any country wanting to block a ruling has to persuade all other WTO members (including its adversary in the case) to share its view. Although much of the procedure resembles a court or tribunal, the preferred solution is for the countries concerned to discuss their problems and settle the dispute by themselves.

Further details of the dispute settlement process can be found on Dispute Settlement section of the WTO website in related links section of this page.

Current Disputes

1.Airbus/Boeing

Both the EU and the US are challenging the level of subsidy each affords to its commercial aircraft industry.

Panels have been established in both cases. The complexity of the issues involved makes it difficult to assess when outcomes can be expected. However, it still remains the UK’s desired wish that even at this late stage that a mutually acceptable solution can be found.

2. US Continued Dumping and Subsidy Offset (Byrd) Act - so-called "Byrd amendment"

Latest Position:

Although the US has repealed the Byrd Amendment, that repeal contains a phase-out clause which means that both Byrd benefits to US companies, and the EU's retaliatory measures against them, remain in place.

Byrd disbursements made in the US during September 2005 – August 2006 increased from those of the previous year. Furthermore, the accession of Romania and Bulgaria to the EU on 1 January 2007 meant that the damage experienced by these countries under Byrd is now also subject to EU retaliation.

On 1 May 2007, the retaliation that the EU has had in place since 1 May 2005 underwent a further increase. A further thirty two customs commodity codes were added from that date to the active retaliation list. However, the retaliation list reduced from 1 May 2008 as a consequence of the level of Byrd disbursements to US industry reducing in the previous year.  The effect of this measure is that the goods on the retaliation list attract an additional 15% import duty when these goods originate in the US.  Identical and similar goods of origin other than the US will not be affected by this action.

Background:
The US "Byrd Amendment" signed into law in the US in October 2000 provides that the proceeds from anti-dumping and countervailing duty cases shall be paid directly to the US companies responsible for bringing the cases (rather than to the relevant US Government Treasury Department).

The EU successfully challenged within the WTO that payments under the "Byrd Amendment" constitute an illegal subsidy to US business. Following continued US non-compliance with this ruling, the EU applied in January 2004 to preserve its rights to apply retaliatory measures against the US. The WTO Arbitrator determined that for each year that the US continues not to comply with the WTO ruling, the EU should be entitled to retaliate up to an amount equal to 72% of the US disbursements to its domestic industry arising from anti-dumping or countervailing duties imposed on EU goods under the Byrd Amendment in the preceding year. Accordingly, the amount of EU retaliation varies from year to year.

The European Commission therefore adopted Council Regulation (EC) No. 673/ 2005 which became active on 1 May 2005. This Regulation provides for retaliation in the form of an additional 15% ad-valorem duty on a range of products originating in the United States of America upon their entry to the EU.

On February 1 2006, the US repealed the Byrd Amendment as part of the US Budget Deficit Act 2006. However, the repeal legislation provides a transition period. In other words, Byrd duties imposed on goods entering the US will continue to be distributed to US companies for some time to come and until the US becomes fully compliant with the WTO rulings the EU will continue to retaliate.

We are keeping everyone who has told us that they have an interest in this issue informed by e-mail.  A list of those goods currently subject to the additional duties can be obtained from Andy Weller andy.weller@berr.gsi.gov.uk

3. Beef Hormones

Following an earlier Panel ruling against the EU in a case brought by the US and Canada against the EU’s ban on the use of beef hormones in stockfarming, the EU adopted Regulation 2003/74/EC, which the EU considers addresses this issue.

However, the US and Canada maintain that the EU is still not within WTO compliance, and continues to apply retaliatory measures in the form of increased tariffs on imports to the US of certain EU-origin goods. The EU, on the other hand considers the retaliatory measures to be illegal as it is now in compliance with earlier WTO rulings.  The UK has not been targeted specifically by the US and Canadian retaliatory measures.

4. Farmed salmon

Norway has challenged definitive EU anti-dumping duties against imports of farmed Norwegian salmon. The EU won and lost on some points and the same goes for Norway. Neither side considers it in their interests to appeal as the price of an appeal could be to lose on important points that the panel did not dispute.

5. Zeroing

The EU continues to challenge the way in which the United States implements anti-dumping measures where the US does not take account of products having a negative or zero margin when anti-dumping calculation methodologies are applied.

Contacts:

Andy Weller
Tel: 0207 215 2321
Fax: 020 7215 2325
Email andy.weller@berr.gsi.gov.uk