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World Trade Organization Case Studies

Who benefits or suffers from the World Trade Organization’s version of “free trade” is seen most clearly in the WTO’s rulings. The following cases are excerpted and adapted from the International Forum on Globalization publication Invisible Government – The World Trade Organization: Global Government For The New Millennium? by Jerry Mander and Debi Barker. See Resources, p. xx.   United States Regulations on Reformulated Gasoline Cleanliness Challenge by Venezuela and Brazil against the United States. [Cases WT/DS2 and WT/DS4]

The WTO’s first ruling dealt a direct blow to a 1993 U.S. Environmental Protection Agency (EPA) rule which required gasoline refineries to make cleaner gas in an effort to reduce air pollution. The EPA had opted for a program that allowed gradual improvement based on past performance. Where past performance could not be reliably ascertained, a refinery’s baseline was set to match the actual 1990 performance data of all oil refineries. Thus, some domestic and foreign producers were treated identically, some domestic producers were held to higher standards than foreign suppliers, and some to a lower one.

The rule was set to expire in 1998, giving refiners five years to bring baseline standards up to a single cleanliness target. However, in 1996 a WTO dispute panel, and later an appellate body, decided the U.S. rules could be “discriminatory” because the gradual phase-in violated GATT’s National Treatment rule, despite the fact that the EPA rule was being applied equally to some U.S. producers. As a result, the EPA, which administers the Clean Air Act, has been forced to rewrite its standards to allow dirtier gasoline. One of the end results will be an increase in health problems in the United States. The Shrimp-Turtle Case Challenge by India, Malaysia, Pakistan and Thailand against the U.S. [Case WT/DS58]

The U.S. Endangered Species Act (ESA) requires domestic and foreign shrimp fishers to catch shrimp by methods that do not kill endangered sea turtles. ESA bans shrimp products from countries that do not use “turtle excluder devices” (TEDs). In 1998, the WTO ruled that U.S. laws created to protect turtles violated WTO rules, including the principle of National Treatment. One proposed solution was that the United States will be allowed to target only individual shrimpers’ boats. The likely outcome of that will be to encourage “shrimp laundering,” where shrimp harvested on boats without TEDs are transferred to boats with TEDs and passed off as “turtle-friendly” for import purposes.

This solution also means that many expenses – such as hiring more border inspection personnel, and training officials to inspect boats – become the burden of countries that wish to protect environmental standards. Previously, the burden of proof was on the exporting commercial interests.

Many environmentalists, especially those from Third World countries, point out that this dispute does not get to the heart of the matter. It fails to address the non-sustainability of industrial shrimp fishing. Small-scale fishing operations in both the North and the South have been harvesting shrimp for many years with little damage to other aquatic life. Sea turtles became threatened only when large, industrial fishing vessels came onto the scene. Although TEDS may save turtles, the continuation of industrial trawling is what destroys millions of marine species, along with the livelihoods of millions of traditional families dependent on small-scale fishing. The Banana Case Challenge by the United States, joined by Guatemala, Honduras, Mexico and Ecuador, against the European Union [Case WT/DS31]

In September 1997, a WTO panel ruled that the European Union (EU) was giving preferential access to bananas produced by former colonies in the Caribbean. This arrangement had been previously negotiated between the EU and its former African and Caribbean colonies under the Lomé Treaty.

The United States, which does not produce any bananas, brought this case against the EU on behalf of the U.S.-based Chiquita corporation, formerly known as United Fruit. Chiquita produces bananas in Latin America on huge plantations that are notorious for exploiting cheap farm labor and using environmentally damaging techniques. In the Caribbean, which Europe is favoring, banana producers tend to be small-scale farmers who own and work their own land (an average of three acres), often incurring higher production costs.

This was a very divisive case within the WTO because of its economic, social justice, and environmental dimensions. At one point the United States began implementing a threat to impose sanctions on more than $500 million of EU exports, nearly setting off a trade war. The EU eventually said that it would comply with the ruling but it is still negotiating with the United States over settlement terms. Beef Hormone Case Challenge by the U.S. and Canada against the European Union [Cases WT/DS26 and WT/DS48]

The European Union has banned the non-therapeutic use of hormones in its food industry, citing many studies that indicate that hormones, particularly implants of pellets containing estradiol, can cause cancer. Following the challenge by the United States and Canada, and citing the onerous provisions of the SPS Agreement and other WTO rules, the WTO ruled against Europe’s ban.

The WTO panel demanded scientific certainty that hormones cause cancer or other adverse health effects, thus ignoring the precautionary principle – “better safe than sorry” – as a basis for food safety regulations. This ruling has frightening implications for the ability of governments to set high standards to protect public health. It means that European consumers and governments are forced to accept imports of beef raised with hormones or be penalized with harsh trade sanctions.

Public opinion in Europe is strongly demanding defiance of this WTO ruling. The United States and Canada have produced lists of exports important to Europe, including luxury items such as prosciutto, cheeses, and Dijon mustard, among other things, on which they intend to slap 100% tariffs if the EU fails to comply. These retaliatory measures would total more than $125 million. The Chilling Effect

More and more frequently, proposed national laws are never put into effect, or are weakened, because another nation threatens a WTO challenge to the proposed law or its implementation. Poor countries are especially vulnerable to such threats by more affluent developed nations, which have more resources, both legal and monetary, to take a case to the WTO. Here are some key examples: Gerber vs. Guatemala’s Infant Health Law

In this well-known case, The Agreement on Trade Related Intellectual Property Rights (TRIPS) was used to thwart a law designed to protect infant health in Guatemala. In accord with recommended United Nations Children’s Fund (UNICEF) guidelines, Guatemala had banned claims on packaging that equated infant formula with healthy, fat babies. Gerber Products Co., the world’s premier seller of baby food, got the U.S. State Department to threaten a WTO challenge of this regulation, arguing that Gerber had an “intellectual property right” under the WTO TRIPS agreement. Under threat of challenge, Guatemala revised its law and now allows labeling that actually violates UNICEF guidelines. AIDS Drugs Denied to HIV-Infected in Thailand and South Africa

In another case, the U.S. pharmaceutical industry is attempting to stop South Africa and Thailand from developing their own versions of AIDS drugs that can be sold at a fraction of the usual price. The TRIPS agreement guarantees a 20-year patent for drugs. However, over objections from industrialized nations, Article 31 of TRIPS provides a way for countries to override the patent through a “compulsory license” clause, which allows a government to grant local companies a license to produce a drug in cases of health emergencies.

South Africa and Thailand, both hard-hit by AIDS, have used this clause to begin to manufacture AIDS-related drugs. For example, U.S.-based Pfizer used to charge $14 for a daily dose of fluconazole, an antibiotic that can fight off a fatal form of meningitis contracted by one in five AIDS sufferers in Thailand. Three Thai companies began making the drug at a cost of just over $1 per daily dose.

The U.S. threatened Thailand with trade sanctions under the WTO. Twenty-five percent of Thai exports go to the U.S. The Thai government then banned compulsory licensing even though it has a genuine health emergency.

The U.S. pharmaceutical companies claim that the drugs are so expensive because they have spent enormous sums of money on research and development. They neglect to mention that some of the most important AIDS drugs were discovered by researchers with the U.S. National Institutes of Health and by researchers in other facilities whose budgets are supplemented with government grants. Their discoveries were then handed over to corporations that produce the drugs and reap the profits. Patents on Plant Varieties: Advancing the U.S.-Style Patent System Challenge by the U.S. against India [Case WT/DS50]

India’s current law deliberately excludes plants and animals from patenting in order to maintain local control over these life forms. This helps to maintain low prices for some products such as pharmaceuticals. Under the current Agreement on Trade Related Intellectual Property Rights (TRIPS), however, “developing” countries must, by the year 2005, allow foreign companies the right to patent local plant varieties.

The basic complaint by the United States was that India had violated its TRIPs obligations by not moving fast enough toward compliance. The WTO agreed, even though its own deadline for compliance is 2005. As a result of this WTO ruling, India was forced to grant market monopolies to corporations on the basis of patents given by other countries.

The Burma Case: Human Rights Affected by Finance and Investment Challenge by the European Community (EC) and Japan against the United States. [Case WT/DS88/1]

In 1996 Massachusetts enacted a law that bars companies that do business with the brutal military regime in Burma (Myanmar) from bidding for large public contracts in the state. The European Community argued that, under WTO rules, including the Agreement on Trade-Related Investment Measures (TRIMS), the Massachusetts restriction is unfair “to the trade and investment community,” and that it breaches current WTO rules on government procurement.

Massachusetts questioned whether doing business with a brutal military regime is fair. Similar economic sanctions were used in the anti-apartheid movement in the United States in the 1980s and have been credited for hastening the transition to democracy in South Africa. Should the Massachusetts law be struck down, the efforts of any social justice movement advocating government sanctions against criminal regimes will be severely hampered.

The mere existence of this WTO challenge has already squelched other efforts to use economic sanctions to uphold human rights. For example, hoping to avoid trouble in the WTO, in 1998 the U.S. Administration actively lobbied the Maryland state legislature to stop the adoption of a selective purchasing law against Nigeria. The proposal subsequently lost by one vote. Looking Ahead

These are some of the more controversial provisions that are currently being considered, or may soon come under consideration at the WTO. Free Trade in Wood Products

A “free trade agreement on wood products,” is being pushed aggressively by the United States under the Advanced Tariff Liberalization (ATL) initiative. Although forest protections are already being eliminated under current WTO rules, the ATL and additional rules being introduced into other WTO agreements would further accelerate the elimination of all tariffs on wood products worldwide. Forest protection groups protest that such an agreement would result in a sharply increased rate of deforestation, declining health in global forests, a significant decrease in environmental protections for forests, and an increase in invasive species. Free Trade in Water

Currently, trade in bulk fresh water is covered by GATT. Already, several corporations around the globe have begun prospecting for fresh water reserves and have made agreements with various countries to begin drawing water from lakes and rivers to be transported across oceans in scrubbed out oil tankers or giant floating bladders. Some nations, led by the United States, are now proposing that another WTO agreement, the General Agreement on Trade in Services (GATS), should specifically offer foreign corporations further rights and access to domestic water and water systems, including the commercial operation of municipal drinking water systems. The Computer Industry and E-Commerce

The computer industry in the United States and other “developed” countries is calling for WTO negotiations to establish global rules on e-commerce, the selling and purchasing of products on the Internet, in the hope of forcing countries to give up their right to tax or otherwise regulate commerce on the web. This would provide an advantage to large corporations for two reasons: (1) businesses that have physical locations (your local bookstore, market, etc.) would still have to pay local, state, and national sales taxes, and (2) full-time Internet access can be too expensive for smaller businesses and individuals. In addition to the access charges, which are projected to increase due to the industry’s push to deregulate, it is expensive to advertise a website and to provide security for financial transactions, not to mention the costs of adding a shipping and handling department to fulfill electronic orders. Thus, small proprietors are less able to compete.

Last Updated Spring 2002

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The Business Case for the WTO — and for its Dispute Settlement System

The continued success of the World Trade Organization (WTO) is critical to the U.S. business community. The global rules-based trading system the WTO embodies has benefited countries around the world — but none more than the United States. And that holds for its dispute settlement system as well.

John G. Murphy Senior Vice President, Head of International, U.S. Chamber of Commerce

October 11, 2021

While the WTO was created in 1995, it built on the foundation of the 1947 General Agreement on Tariffs and Trade (GATT). Combined, the WTO and the GATT have revolutionized global commerce. Eight successful multilateral negotiating rounds have helped increase world trade from $58 billion in 1948 to well above $25 trillion today. This 40-fold increase in real terms has brought a rising tide of commerce, job creation, and rising incomes.

It isn’t just the tariff elimination brought about under the GATT and the WTO that benefits American companies and the workers they employ. WTO rules protect U.S. firms operating abroad from unfair, discriminatory treatment. American firms rely on these rules every day of the year.

It’s become commonplace to say the WTO’s accomplishments are long in the past, but this isn’t so. The WTO’s Trade Facilitation Agreement, which entered into force in early 2017, is a cost-cutting, competition-enhancing, anti-corruption agreement of the first order. Once fully implemented, it has the potential to increase global merchandise trade by up to $1 trillion annually.

In addition, a new WTO agreement entered into force in 2016 expanding U.S. firms’ access to other countries’ government procurement markets valued at $1.7 trillion; and another eliminated duties on $1.3 trillion of information technology goods the same year. These trade pacts are delivering for American workers and companies.

An Adjudicator of Disputes

In addition to serving as a forum for negotiations, the WTO also has a critical role in dispute settlement. The WTO’s Dispute Settlement Understanding outlines procedures for panels to rule on disputes brought by its member states, and it also establishes an Appellate Body in the event panel decisions are appealed.

The United States has been a major beneficiary of WTO dispute settlement, bringing and winning more cases than any other WTO member. In fact, the United States has won or favorably settled more than 90% of the completed WTO cases it has brought, which total more than 100 of the 350 disputes on which decisions have been issued.

However, the benefits of this system go much further. The fact that the WTO’s rules are enforceable under its dispute settlement system motivates governments to adhere to the commitments they have undertaken without resort to litigation.

Underscoring bipartisan political support in the United States for the principle of binding dispute settlement, House Democrats in 2019 pressed the Trump administration to prioritize dispute settlement in the United States-Mexico-Canada Agreement (USMCA) negotiations. Specifically, they urged removal of the NAFTA-era threat of “panel blocking,” thus allowing decisions to be binding and effective. House Ways and Means Chairman Richard Neal (D-MA) memorably insisted that, of his priorities, “enforcement, enforcement, enforcement is the most important of all.” This imperative surely applies at the WTO as well.

The benefits of WTO dispute settlement for the United States aren’t just theoretical. These wins include the following examples:

(1) Dispute with the EU over Tariffs on IT Products: In 2010, WTO dispute settlement proceedings upheld the U.S. claim that the EU violated its WTO tariff commitments by imposing duties as high as 14% on flat panel computer monitors, multifunction printers, and cable, satellite, and other set-top boxes. The EU had claimed it could charge duties on the products simply because they incorporated newer technologies or additional features.

The United States successfully argued that the EU was taxing innovation in a manner that could impair continued technological development and raise prices for millions of businesses and consumers. At the time, global exports of the covered products were estimated at more than $44 billion, so the EU’s elimination of its duties to comply with the WTO ruling was significant: It meant real market access, more sales, and direct benefits for American workers. Absent the WTO decision, it’s likely the EU would still be levying the duties today.

(2) Dispute with China over Barriers to U.S. Movies: In 2009, the WTO Appellate Body upheld panel decisions that Chinese film import restrictions were inconsistent with the country’s WTO obligations. China subsequently agreed to significantly increase market access for U.S. movies to comply with the decision.

At the time, Chinese box office revenue was approximately $2.1 billion annually, much of it coming from 3D, IMAX, and similar enhanced format movies which are a rapidly growing sector of the film industry. The WTO decision played a key role in bringing about China’s compliance with its obligations, and it’s difficult to see how the United States could have achieved this objective otherwise.

The U.S. record in WTO dispute settlement with China is especially strong: As the Peterson Institute for International Economics has reported , U.S. officials had challenged Chinese practices 23 times in the WTO as of 2019 — and won 20 times, with three cases pending.

(3) Dispute with Indonesia over Barriers to U.S. Agricultural Exports: In 2016, WTO dispute settlement proceedings upheld the U.S. claim that Indonesia’s restrictions and prohibitions on U.S. apples, grapes, potatoes, beef, poultry, and other agricultural products violate commitments the country has made as a WTO member. The WTO ruled in favor of the United States on 18 out of its 18 claims, which involved a complex array of trade barriers.

Because Indonesia is the fourth most populous country in the world, the long-term benefits to U.S. agricultural producers are potentially very large. U.S. exports of the affected products had reached $115 million even with the onerous barriers in place. As in the other cases cited above, the United States had no obvious way to press for the elimination of these barriers outside WTO dispute settlement.

Reform and the Appellate Body

Despite these and many other successes, the future of the WTO dispute settlement system — and particularly its Appellate Body — is in jeopardy. U.S. administrations over the past 20 years have raised concerns about “overreach” in Appellate Body decisions, arguing that some are not clearly supported in the WTO agreements and that the slow pace of its operations saps its utility.

There’s growing agreement in the United States and elsewhere that a number of these concerns have merit and call for reform; the question is, what is the appropriate remedy? The Trump administration’s answer was to block Appellate Body appointments to the point that, by December 2019, the retirement of term-limited Appellate Body members had left it without the quorum it needs to function. At no time did the Trump administration offer concrete proposals to resolve its complaints, to the frustration of other members.

As a result, U.S. companies have been unable to secure relief from discriminatory treatment abroad or to address instances in which a trading partner has otherwise violated its WTO obligations. While governments may continue to request panels to consider violations, either party can exercise its right to appeal a panel decision, which, with the Appellate Body inoperative, dispatches the dispute to perpetual limbo. Other governments have been developing workarounds to continue to use the system for their citizens, but the United States remains shut out of this crucial element of the WTO’s binding dispute settlement process entirely. What was once an important tool in the U.S. enforcement toolbox is unavailable, and no effective substitute has been identified.

The price of allowing this impasse to linger could be high. Executives with American companies fear that other countries’ compliance with the WTO agreements will decline over time if its dispute settlement system is no longer binding. They are concerned that new trade barriers and discriminatory treatment will become more common.

The time is ripe for the United States to lead efforts to overcome this impasse. Over the past several years more countries have come to recognize the need to address the concerns the United States has raised. The United States should lead reform efforts by engaging substantively with other WTO members to address its concerns and restore a binding dispute settlement system.

The Chamber has expressed support for efforts to translate the Walker Principles (articulated by New Zealand’s Ambassador to the WTO David Walker) into a form that can address the legitimate concerns that U.S. administrations have identified. The logical next step is for the United States to detail how it might seek to operationalize these reforms in a concrete way.

The stakes are high, but the door is open for reform of WTO dispute settlement and restoration of the Appellate Body. The U.S. business community stands ready to support this important undertaking.

About the authors

John g. murphy.

John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.

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• case study 40

MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY 40

Thailand: Conciliating a Dispute on Tuna Exports to the EC

Nilaratna Xuto*

  Disclaimer: Opinions expressed in the case studies and any errors or omissions therein are the responsibility of their authors and not of the editors of this volume or of the institutions with which they are affiliated. The authors of the case studies wish to disassociate the institutions with which they are associated from opinions expressed in the case studies and from any errors or omission therein.

> Case Studies main page > Introduction

ON THIS PAGE:  > I. The players > II. Challenges and the outcome > III. Lessons  

Tuna is arguably one of the most well-known and abundant of fish, found in large quantities at supermarkets and convenience stores around the world. It is such a popular sight in its canned form that one may have even dissociated it from its origins as a fish, until reminded of the amusing slogan-cum-brand, ‘chicken of the sea’. As such, it is safe to say that tuna enjoys as much popularity among consumers as the humble and ubiquitous chicken.

On the production side, easy accessibility and popularity translates into big business, thriving markets and fierce competition. For producers of canned tuna, the fish is their livelihood, an important source of income and an industry of serious economic significance, contributing as it does to the national balance of payments, the employment rate and, subsequently, a productive and healthy social climate.

This is especially true in the case of Thailand, the world’s third-largest producer of canned tuna and the largest exporter, accounting for 31% of the global volume of exports. As of 2000, the United States has remained Thailand’s biggest export destination, followed by the European Community (EC) and then Canada.( 1 ) Since Thailand’s tuna industry is export-oriented, with almost all its production intended for overseas markets, foreign import restrictions and regulations wield considerable impact on its growth and overall dynamism. This is where Thailand encountered difficulties with one of its major trading partners — the EC.

Despite its impressive world ranking, producers of canned tuna in Thailand were convinced that their industry was capable of considerably better performance given more equitable access to the EC market. This inequity existed primarily in the form of a preferential tariff granted by the EC to canned tuna producers from the African, Caribbean and Pacific states (ACP countries), a status consolidated in the Cotonou Agreement (ACP Agreement) of 3 February 2000 between the EC and the ACP countries. While ACP countries were enjoying zero tariffs on tuna imports, other countries such as Thailand were continuing to face an inhibiting tariff of 24%, which was proving detrimental to the legitimate economic interests of Thailand as a major producer of canned tuna. Furthermore, zero import tariffs for ACP countries encouraged investors increasingly to view the ACP countries as a favourable investment destination, in contrast to Thailand, undermining the cost and other comparative advantages that Thailand has to offer.

This case study illustrates the manner in which Thailand raised the issue and challenged the EC tariff within the framework of the Dispute Settlement Understanding (DSU) provided for in the WTO Agreement. There are three major stages to the DSU: consultation between the concerned parties, adjudication by Panels and, if necessary, the Appellate Body, and implementation of the ruling. However, it is not always necessary for every case to follow this trajectory and to be taken to Panels. In fact, the preferred path is for members to settle the dispute between themselves, through consultations.( 2 )

To this end, the DSU provides good offices, conciliation and mediation which may be requested by members if consultations fail to produce an acceptable solution. These options serve as an intervening step in which an independent third party is engaged to help members resolve the dispute at hand, thereby avoiding Panel proceedings which can be the most costly and time-consuming stage of the DSU procedures.

The events concerning this case study span approximately three and a half years, dating back to the conclusion of the ACP Agreement in 2000, followed by the WTO consultation and mediation process and concluding with the EC’s new Council Regulation of 5 June 2003. As the first case in WTO history to be settled through mediation, it sets a valuable example for fellow member countries, demonstrating that disputes may be resolved within the WTO without resorting to formal litigation.

Although this is a recent case, it is worth noting that the EC-ACP relationship dates back almost forty years to 1963. During this time a number of agreements were produced through which the EC granted ACP countries trade benefits on a number of products, including canned tuna. Thus, for this particular product, ACP countries had been enjoying free access to the EC market for almost thirty years prior to the ACP Agreement of 2000. By the mid-1990s, Thailand’s tuna industry was increasingly feeling the negative impact of this preferential trading arrangement, as reflected in revenue, investment and opportunity losses.

With the formal establishment of the WTO in 1995 and the entry into force of the GATT 1994 rules came a more favourable climate in which to address such preferential or discriminatory trading relationships in the international arena. One of the basic principles of the WTO legal framework is the MFN (most-favoured nation) principle, which states that ‘all WTO Members are bound to grant to each other treatment as favourable as they give to any other Member in the application and administration of import and export duties and charges. A tariff concession made to one Member must therefore be extended immediately and unconditionally to all other Members.’( 3 ) Thus, with regard to the EC’s preferential tariff rates, the legal impetus and the framework within which Thailand could challenge the discriminatory tariff were in place. It would be up to the concerned parties of Thailand to take up the cause, and to gather the information, personnel and determination necessary to see it through to a satisfactory conclusion.

I. The players 

The countries concerned here are Thailand and the Philippines on the one hand and the European Community on the other. The Philippines, as a fellow ASEAN and WTO member facing similar difficulties, joined with Thailand in this landmark attempt to prove that preferential tariffs had long been impairing their economic interests, and to seek appropriate redress or compensation from the EC. For the purposes of this case study, however, the focus will remain on Thailand and its actions, although the term ‘complainants’ will be used to refer collectively to Thailand and the Philippines when necessary.

Throughout this process, close collaboration and co-ordination was a vital element between private-sector players — that is representatives of the complainants’ tuna industries — and their respective governments. In Thailand’s case, it was the Ministry of Commerce specifically that provided a strong link between the tuna industry and the Thai permanent mission to the WTO in Geneva, where the mediation took place. At the WTO proceedings, the role of negotiator was assumed by the Thai ambassador to the WTO, who thereby served as the official voice of Thailand.

The Thai tuna industry was represented by Chanintr Chalisarapong, in his capacity as chairman of the Thai Tuna Packers’ Group/Thai Food Processors’ Association. Chanintr acted as a focal point in consolidating industry data and information, as well co-ordinating efforts and co-operation from the private sector side. Since the matter involved issues of international law and practice, lawyers were also hired. Although this was a WTO case, the complainants were challenging the EC, whose headquarters is located in Brussels. Therefore the Thai side chose to engage a law firm based in Brussels, which is where the first round of consultations was also held. Finally, although this case was treated as strictly confidential, no such dispute can exist entirely in a vacuum; therefore, external forces in the form of political pressures from some EC governments had their impact as well.

From the start, the role of each of the major players was well delineated, with each playing to their natural strengths. The major task for the private sector was to provide industry data, information and support in every form possible to the Ministry of Commerce. The Ministry of Commerce, on the other hand, examined the legal and related aspects associated with the negotiation process, as well as providing an official link to Geneva and the WTO proceedings. The Brussels law firm provided in-depth legal counsel and professional backing in writing official submissions, although it did not participate in the actual mediation.

Constructive co-operation between the public and private sectors was a key element for a number of reasons. First, a strong, mutually supportive partnership created a sense of solidarity in a shared pursuit. Second, the government alone would not have been able to allocate the funding necessary for an endeavour of this nature. Therefore, where financial resources were needed, the private sector pooled its funds. Third, the sharing of industry data and information — from sources such as the Customs Bureau, and FAO and EC statistics — enabled the team to build a much stronger case than would otherwise have been possible, which allowed them to maintain consistency and confidence in their positions and arguments throughout the lengthy process. In sum, a vital component of success was the readiness of the affected industry to contribute to its own defence, in terms of funding and manpower.

Of their working relationship with the Thai government Chanintr remarked, ‘We launched into the process of seeking redress, confident in our just cause, equipped with the factual tools and reassured by the full support of the government and its willingness to take the lead in negotiations and in lobbying efforts at all levels.’ This willingness on the part of the government was matched by the private sector’s own efforts: ‘When we saw that there was not enough legal expertise in the ministry, we, the private sector, gathered the funding needed to hire a law firm in Brussels. While representatives of the government engaged actively in the negotiations, we continuously provided factual evidence and helped to formulate appropriate ways to respond to the rebuttals and counter-arguments throughout the consultation and mediation processes. This kind of Cupertino isn’t always in place with other industries.’

II. Challenges and the outcome 

The initial challenge faced by Thailand was, indeed, how to persuade the EC to enter into discussions on the matter. On 2 March 2000 the EC requested a waiver of its MFN obligations with regard to the ACP Agreement. In the eighteen months following the request until the adoption of this waiver, Thailand had on numerous occasions expressed its concerns relating to the implementation of the ACP Agreement and the negative effects that it would have on their canned tuna exports. They received no response.

At the Doha Ministerial Conference, however, a give-and-take situation presented itself. The EC-ACP Agreement could not be extended without the consensus of all WTO members in approving the adoption of the requested waiver. Realizing that Thailand would not concede, the EC agreed to hold consultations with Thailand and the Philippines (the complainants) to examine their differences. In the end, Thailand agreed to concede on the waiver, on condition that their case be taken up in an appropriate forum, with the aim of resolving the conflict of interest.

Thus on 14 November 2001, the day the waiver was adopted, EU Trade Commissioner Pascal Lamy addressed a letter to Manuel A. Roxas, the Philippines Secretary of Trade and Industry, and Adisai Bodharamik, the Thai Minister of Commerce, to express the EC’s willingness to enter into full consultations with the Philippines and Thailand. The letter stated that the aim of the consultations would be to ‘examine the extent to which the legitimate interests of the Philippines and Thailand are being unduly impaired as a result of the implementation of the preferential tariff treatment for canned tuna originating in ACP countries’.( 4 ) The complainants were not satisfied with the promise of consultations; they had wanted full arbitration. At Thailand’s insistence, therefore, the letter also included the option of taking the matter beyond consultations. Since the EC insisted on avoiding arbitration, the parties compromised and decided that, should consultations fail to deliver an acceptable resolution, ‘the Community would be open to recourse to the mediation procedure as provided under Art. 5 of the WTO’s DSU’.( 5 ) In this manner, the dispute process was initiated.

Shortly afterwards three rounds of consultations were held, the first in Brussels (6-7 December 2001), the second in Manila (29-30 January 2002) and the third in Bangkok (4-5 April 2002). The Ministry of Commerce did not enlist the direct participation of the private sector until the second and third rounds, when the latter contributed to the discussions and negotiations. Although government officials are usually entrusted to do the talking during consultations, in this case Chanintr and other private-sector representatives were given the opportunity to provide factual support and to tell their story. Throughout these consultations, complainants demonstrated preparedness and commitment in responding to the numerous rebuttals and arguments springing back and forth between the parties. Nevertheless, as anticipated, a satisfactory solution was not to be had at this stage.

On 4 September 2002 the parties jointly submitted a formal letter to the Director-General of the WTO, requesting mediation. Agreed-upon working procedures were attached to the letter, committing both parties to issue a written submission to the WTO Mediator on 21 October 2002. The written submission would provide a comprehensive picture of the dispute, as well as explain in detail the arguments and positions maintained.

A period of intensive collaboration followed, during which the written submission was drafted. Thailand, the Philippines, their respective governments and the Brussels lawyers held in-depth brainstorming sessions and communicated constantly by e-mail. By the end of that same month, their joint submission was virtually completed. At a meeting with the mediator on 5 November 2002, the WTO ambassadors of each party delivered oral statements in which they presented their main arguments and requests. The mediator alternately called on each party, giving both sides ample opportunities to rebut arguments and to direct questions at one another.

Having alleged economic injury, the major challenge for the complainants was to confirm the merits of their claims, and to convince the mediator that the preferential tariff had substantially negative effects on their tuna industries. The complainants consolidated and analyzed data and worked out a sound methodology by which to make an accurate, quantitative estimate of these adverse economic effects. In doing so, they noted that the EC market — already the largest single market in the world for canned tuna — was continuing to grow and that, while the ACP countries’ market share experienced substantial growth in keeping with the expansion of the EC market, the volume imported from Thailand decreased by 46% between 1994 and 2000, according to Chanintr.

The complainants were able to show that this decrease was not due to lack of competitiveness on their part, as exports to other markets in North America, Australia and the Middle East either remained stable or experienced positive growth; if they had lacked competitiveness, they would have experienced similar losses in other markets to which they were exporting. Furthermore, imports from ‘non-preferred’ countries other than the complainants showed similar downward trends. Even with the advent of the Asian financial crisis in 1997, which drove the Thai currency down to such levels that canned tuna imports from Thailand were even less expensive than usual compared with those of its competitors, Thai export performance vis-à-vis the EC did not improve.

The complainants concluded that the 24% import tariff so distorted the conditions of competition between the complainants and their ACP counterparts that the complainants’ products were essentially displaced from the EC market. In such circumstances it would be almost impossible for the complainants to reach their full export potential, and the growth of their canned tuna industries was evidently threatened. According to them, the fact that they managed to maintain a notable EC market presence despite the 24% handicap, while ACP countries were enjoying free access, was in itself a direct testament to the competitiveness and productivity of their industries.

Another challenge related to WTO members’ rights and obligations and the difficulty in striking a balance between what one might characterize as a ‘legal’ versus a ‘political’ spin on the situation. Legally speaking, Thailand had a solid right to pursue dispute resolution. Politically speaking, however, one must recall that in the WTO there are certain forms of ‘positive’ discrimination which are acceptable; that is, discrimination in favour of the poorest countries. In the light of this, Thailand argued that, while the preferential tariff was perhaps justifiable in the 1970s as a means of support for least developed countries (LDCs), greatly improved investment and economic situations in the ACP countries by the 1990s no longer warranted it. Thailand did not refute the rationale behind ‘positive’ discrimination, but maintained that favourable treatment should not be extended to any developing member to the detriment of another developing member.

Once all the arguments and rebuttals had been presented, it was time for the mediator to formulate an advisory opinion as to how the matter should be resolved. This required the mediator to make a thorough examination of the logic and reasoning behind claims made by both parties, for which they consulted with economists. On 20 December 2002, the mediator came out with an advisory opinion that the EC open up a new quota of 25, 000 tonnes at a tariff rate of 12%, to be allocated to four beneficiaries: Thailand (for 52% or 13, 000 tonnes), Philippines (36% or 9, 000 tonnes), Indonesia (11% or 2, 750 tonnes) and other third countries (1% or 250 tonnes).

The mediator’s opinion indicated that the merits of the complainants’ case had been acknowledged and accepted. The complainants were satisfied by this outcome, but the work was not yet over. The WTO mediation advisory opinion, after all, is not a legal, binding decision. Therefore the EC had every right to reject the advisory opinion and to maintain what had become the status quo as far as imports from the complainants were concerned. Of course, the EC had to take into account that doing so might prompt the complainants to take the case to Panel, which would have turned the matter into a fully-fledged legal battle.

Nonetheless, the complainants’ actions in this next phase following the advisory opinion would prove every bit as decisive as the mediation itself. Chanintr characterized this phase as a period of ‘quiet lobbying’ — no small task, as the EC consisted of fifteen separate governments, each of which had to be convinced to support the mediator’s opinion.

Discreet lobbying required tact and diplomacy. Here again, the close link between the private sector and the government proved indispensable. said Chanintr offered the following comment.

Through close collaboration our cause was raised everywhere, be it Doha, Brussels or Geneva. Thai ambassadors and officials maintained a constant dialogue, formally or informally, with their EC counterparts everywhere. Of the fifteen EC members at the time, northern Europe supported our cause, as they had no tuna industry of their own to protect. Spain and Portugal, on the other hand, were extremely opposed to the mediator’s opinion. In between were France and Italy. We realized that France’s opinion carried so much weight among EC constituents that it could have turned the majority vote within the EC either way. Fortunately, our Prime Minister paid an official visit to France at the time and he raised the issue with President Jacques Chirac. He also held discussions with the French Prime Minister and some of his Cabinet members. France ended up supporting our case — this was the real turning point. We knew then that our case had achieved success in concrete terms.

These concrete terms were set out in the EU Council Regulation No. 975/2003 of 5 June 2003, in which the tariff-rate quota suggested by the mediator was officially adopted. The Regulation specifies that the ‘tariff quota shall be opened annually for an initial period of five years. Its volume for the first two years shall be fixed as follows: 25,000 tonnes from 1 July 2003 to 30 June 2004, and 25, 750 tonnes from 1 July 2004, to 30 June 2005.’( 6 ) The regulation also allowed for a revision in the second year after the tariff quota is opened, so that the volume of the quota could be adapted to the market needs of the EC, if necessary. The regulation entered into force following its publication in the Official Journal of the European Union , and is ‘binding in its entirety and directly applicable in all [EU] Member States’.( 7 )

III. Lessons 

This case is a good example of how developing country members were able to use their WTO rights to secure more equitable treatment from a developed country trading partner. Once the positive resolution had been reached, EU Trade Commissioner Pascal Lamy travelled to Bangkok to inform Thailand’s Minister of Commerce, Adisai Bhodharamik, an indication of continued good relations between the two trading partners. Indeed, Chanintr emphasized that, although the tariff situation was of great importance to its canned tuna industry and national interests, Thailand made a conscious effort to maintain good relations with the EC throughout the proceedings. He said that ‘in resorting to the dispute settlement process, we did not seek to confront, but opted for friendly persuasion and understanding. After all, the EC is one of our major trading partners, and a very important consumer not only of Thai tuna but in other sectors as well. We intended to avoid at all costs doing anything that would jeopardize our long-standing and good relationship with the EU.’

On a broader level, it is well accepted that taking action can itself be a sticking point for developing countries wary of investing the time, energy and financial resources in a consultation and mediation process which may not even produce any binding outcomes, let alone taking the matter to Panel proceedings. This is often the case for other sectors within Thailand as well. Chanintr nonetheless encourages countries to pursue action if it feels that it has a strong case. An adverse outcome to a dispute is not always a complete loss. The country will at least have made itself heard, which can have positive effects on negotiations in other fora. On the other hand, if the country wins, then the economic returns on the invested time, money and energy will surely come back to it many times over. In Chanintr’s opinion, Thailand’s main objective was to show the international community that an unfair practice was being directed at the complainants and that they were serious about challenging it.

Regarding obstacles, Chanintr sees them as inevitable and should therefore inspire action rather than inertia. Instead of simply dwelling on them, efforts should be made to overcome obstacles because they are and always will be an inherent part of disputes and negotiations. Above all, this means that economic players must collect data and maintain consistent industry information. Without solid factual evidence, any attempts to make a legal impression would be seriously undermined from the start, as every claim and argument put forth could be challenged or rejected by the opposing side. Certainly, the EC initially rejected just about every argument made by the complainants, but Chanintr reassured Thailand’s ambassador to the WTO that the private sector would not back down, and that they would continue to support the government. Another major obstacle is the issue of unity within a given industry or sector, which is often lacking, resulting in poor co-ordination and teamwork. Therefore, efforts must be made to achieve the level of commitment and the momentum necessary to support the industry throughout the dispute settlement process.

This case sets a precedent for other member countries, demonstrating that even without full court proceedings, a binding result could ultimately be achieved. Though some observers may comment that a 12% tariff is still too high, for Chanintr and his team, ‘Compromise was the best outcome, and we are satisfied with the result. We wanted a win-win situation where trade would be managed as fairly as possible. We didn’t want to take advantage of our opponent, or to simply turn the tables on them.’

The overriding lesson to take away from this case is that co-operation between a well-represented tuna industry and the Thai government made it possible for the team to overcome obstacles that so often prove to be insurmountable stumbling blocks for other industries or sectors. The public-private sector collaboration utilized in this case sets a positive example for negotiations in other fora. Chanintr emphasized that

Government and the private sector working hand in hand can be the best weapon to defend our national interests. The government cannot negotiate effectively without good information and support from the private sector. The two sectors must work together and determine very clearly how much time and resources they have to spend and, if they win, how much the industry will benefit as a whole. Combining strengths made our case more solid, which led to much greater bargaining power. We could not have done it alone.

NOTES: 1.- Rabobank International, ‘The Dynamics of the Thai Tuna Industry’, Industrial Note IN 044-222, February 2002, pp. 1-3. back to text 2.- Dispute Settlement Training Module, ch. 6, WTO website, http://www.wto.org. back to text 3.- Dickson Yeboah, ‘Course Material for Intensive Course on Trade Negotiations Skills’, WTO Principles and World Trade Negotiations , January 2004. back to text 4.- Letter from EU Trade Commissioner Pascal Lamy to the Ministers of Commerce of Thailand and the Philippines, 14 Nov. 2001. back to text 5.- Ibid. back to text 6.- Council Regulation (EC) No. 975/2003 of 5 June 2003, opening and providing for the administration of a tariff quota for imports of canned tuna covered by CN codes 1604 14 11, 1604 14 18 and 1604 20 70. Published in the Official Journal of the European Union , 7 June 2003. back to text 7.- With the addition of ten new member countries to the EU on 1 May 2004, the complainants are set to revisit tariff negotiations with the EU, which provides an opportunity to lower further the 12% rate and to discuss forms of compensation, since new member countries are required to employ the EU tariff, which in some cases is a marked increase from their usual rate. back to text  

* International Institute for Trade and Development, Bangkok.

Case Study 1: The World Trade Organization (WTO)

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The General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO, was signed in 1947 and entered into force on January 1, 1948 on a provisional basis (Barton et al. 2008: 27-60; Lanoszka 2009: 17-76). Although officially only an international treaty, the GATT evolved into a “de facto world trade organization” (Hoekman 2002: 44) that provided a negotiating forum for its contracting parties and a set of rules for conducting international trade. The WTO, established on January 1, 1995, includes the GATT agreement and is a formal, rule-based international organization with numerous rules and obligations that generally apply to all its members.

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WTO Case Review 2018

37 Arizona Journal of International and Comparative Law 49 (2020)

Arizona Legal Studies Discussion Paper No. 20-08

88 Pages Posted: 16 Mar 2020

University of Kansas - School of Law; International Bar Association; Council on Foreign Relations (CFR); Royal Society for Asian Affairs; Indian Society of International Law

David A. Gantz

Univ. Of Arizona College of Law; Mexico Center, Baker Institute

Shannon Keating

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Eric Witmer

Kansas Supreme Court

Dentons U.S. LLP

Date Written: March 13, 2020

This WTO Case Review is the 19th in our annual series on substantive international trade adjudications issued by the Appellate Body of the World Trade Organization. Each Review explains and comments on Appellate Body Reports adopted by the WTO Dispute Settlement Body (DSB) during the preceding calendar year (January 1st through December 31st), excluding decisions on compliance with recommendations contained in previously adopted reports. In this year’s Review, we cover one case, Brazil – Certain Measures Concerning Taxation and Charges, which was issued in 2018, and normally might have been adopted at the December 18, 2018 DSB meeting, following its issuance on December 13th. Possibly, because of conflict over WTO dispute settlement reform, the DSB did not adopt it until January 11, 2019. The future of the multilateral dispute settlement system is in doubt. With uncertainty as to whether there will be future Appellate Body decisions to review in 2019 and beyond, we thought it best to include the Brazil Taxes case now.

Keywords: international trade, WTO, Appellate Body

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This page provides links to the complete output of a unique research programme launched in 2001 devoted to systematic economic-cum-legal analyses of the World Trade Organization (WTO) Dispute Settlement determinations. The annual volumes describe and constructively criticize all decisions rendered by WTO Panels and the Appellate Body, except for a few disputes that were decided on purely technical grounds.

Each report discusses a different WTO dispute, and is written jointly by an economist and a lawyer, both leading experts in their respective fields. The aim is to determine for each dispute whether the Panel’s or Appellate Body’s decision seems justifiable and desirable from an economic and a legal point of view; and, if not, to what extent the problem lies in the reasoning of Panels or the Appellate Body when interpreting the wording of the relevant WTO agreements or specific commitments made by WTO Members. 

Click on the buttons below to access the WTO Case Law Reports of that year.

" The WTO case law project with Cambridge Press is an extraordinary interdisciplinary collaboration. For over a decade, it has brought together distinguished lawyers and economists to provide a thorough analysis of the key cases and issues in the WTO dispute system. It is a unique and valuable resource for practitioners, policymakers and academics in law, economics and political science ." - Alan O. Sykes, Stanford Law School

The first nine volumes were sponsored by Jan Wallander och Tom Hedelius Stiftelse, Stockholm, and the American Law Institute (ALI). They were written in the context of the ALI project Legal and Economic Principles of World Trade Law . Since 2014 the project has been sponsored by the Global Governance Programme of the European University Institute in Florence.

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