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Hawley: WTO dispute settlement hurts the U.S., ag rules unfairly restrict subsidies

Sen. Josh Hawley (R-MO) on Wednesday claimed the World Trade Organization inappropriately limits U.S. agricultural subsidies and contended its dispute settlement system disfavors the U.S. as he called on the Senate to vote to withdraw the U.S. from the organization.

Hawley on May 7 introduced a joint resolution to withdraw the U.S. from the WTO after arguing in a New York Times op-ed that the multilateral trading organization should be abolished altogether. The Senate Finance Committee has 45 days to vote on the legislation after its introduction or it will “be automatically discharged from further consideration of the joint resolution,” according to Uruguay Round Agreements Act. After the 45 days are up, Hawley will have the option to take the joint resolution to the full Senate for a vote, according to parliamentary procedure.

In a Senate floor speech, the Missouri Republican said China’s accession to the WTO has cost the U.S. millions of jobs and claimed that Beijing has failed to liberalize its economic practices as promised. Senate Finance Chairman Chuck Grassley (R-IA), meanwhile, has argued that a U.S. withdrawal from the WTO would only work in China’s favor because it would create a leadership vacuum that Beijing would fill.

The Senate Finance Committee today has “no plan to” vote on Hawley’s resolution, a panel spokesman told Inside U.S. Trade in an email on Wednesday.

Hawley on Wednesday took issue with the WTO’s departure from the General Agreement on Tariffs and Trade, creating a dispute settlement body to interpret trade agreements and settle trade differences between countries. “The effect was to take trade disputes out of the hands of elected national leaders and commit them to the control of international lawyers, in Geneva,” Hawley said.

“WTO lawyers have not been kind to America,” he contended. “The WTO’s dispute resolution process has systematically disfavored the United States, a complaint that presidents of both parties have lodged for years. The United States has lost ninety percent of the cases brought against it, hurting industries across our nation, from steel workers in the Rust Belt to cotton farmers in states like my own.”

Hawley’s dispute settlement claims, which echo allegations made by President Trump, fail to acknowledge that the U.S. wins the vast majority of the cases it brings against other members at the WTO, as do all claimants, with some analyses putting the number as high as 91 percent. The U.S. also loses at a lower rate than other respondents, but faces more challenges than others.

Even if the U.S. loses a case, it does not necessarily have to comply with a WTO ruling, as John Murphy, the U.S. Chamber of Commerce’s senior vice president for international policy, noted in a tweet. The Uruguay Round Agreements Act explicitly states that WTO dispute settlement panel decisions do not automatically lead to changes in U.S. laws or practices, he said.

But the Trump administration has also handicapped the WTO’s dispute settlement system, making the system more similar to the GATT than ever before, Cato Institute analyst Simon Lester suggested in a tweet. “With regard to GATT/WTO dispute settlement, the Trump administration has effectively brought itself back to the GATT system. I don’t see how WTO withdrawal would add much here,” Lester said in response to Hawley.

A major difference between the WTO’s dispute settlement system and its predecessor is the WTO’s authorization of trade retaliation if a member refuses to comply with a panel or Appellate Body ruling. However, the U.S.’ dismantling of the Appellate Body leaves members unable to seek retaliation if another party to a case wants to appeal a panel ruling. The U.S. has been blocking Appellate Body appointments since mid-2017, leaving the body without a quorum to hear new cases.

Hawley also criticized what he called the “strict limits” the WTO places “on the support we can provide our farmers and ranchers, even as other nations refuse to comply with WTO rulings in favor of our producers.” As a developed country, the U.S. generally is allowed to subsidize 5 percent of the value of its agricultural production — its de minimis rate. The U.S. is also among roughly 30 other WTO members permitted to subsidize beyond its de minimis; the U.S. can exceed its de minimis by $19.1 billion, more than any other WTO member.

Backing another Trump administration criticism, Hawley said on Wednesday that the WTO “permitted China to claim special status as a ‘developing country’ from the moment it joined the group, even though China was already the sixth-richest nation in the world by GDP in 2000. And China jealously guards this sweetheart deal even today, allowing it to defer its obligations, to skirt the rules that we follow, and to continue to amass power at our expense.”

China has repeatedly claimed that it has taken on more obligations than any other developing country. For instance, per the terms of its accession protocol, China’s de minims for agricultural subsidies is 8.5 percent of its value of production. Unlike the U.S., China is not permitted to exceed that de minimis.

Lester, in response to Hawley’s complaint that the WTO “remains completely unequipped” to protect intellectual property, said on Twitter that the WTO added “extensive” IP protections to the trading system that the GATT did not have. “If one of your objectives is stronger IP protection, it’s hard to see why you would want to go back to the GATT,” Lester said.

 

Source: Inside Trade

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