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Pratap Ravindran

Without pre-judging the case, it is safe to say that recourse to WTO arbitration does not necessarily mean that the US will walk away from the dust-up unhurt. Contrary to popular perception, the US has not been able to have its way all the time in world trade.

MUMBAI, March 7

"THOSE who shut down trade are not confident." That was Mr George W. Bush in the course of his presidential campaign.

"The world steel market is not the Wild West where people do as they like. There are rules to guarantee the multilateral system.'' That is Mr Pascal Lamy, European Union Trade Commissioner, now.

When the US ram-rodded through the World Trade Organisation in order to consolidate its position as the sole surviving Superpower and to modulate world trade to its benefit, it did not reckon with the law of unintended consequences.

And so, it now finds itself entangled in rules and regulations of its own making in a bid to protect its domestic steel industry through the imposition of tariffs up to 30 per cent on most of its steel imports.

The US Government insists that its action is perfectly legal under the world trade rules inasmuch as it constitutes a response to unfair global trade in steel.

But the European Union Trade Commissioner, Mr Pascal Lamy, is not buying that argument. He says that the WTO safeguard clauses are designed to protect markets from import surges - and that US import of steel has been declining over the last few years.

Without pre-judging the case, it is safe to say that recourse to WTO arbitration does not necessarily mean that the US will walk away from the dust-up unhurt. Contrary to popular perception, the US has not been able to have its way all the time in world trade.

Thus, on January 14, the WTO appellate body had handed down a ruling holding the US to be in continued violation of WTO rules in providing prohibited export subsidies to its corporations, thereby clearing the way for the EU to impose trade sanctions against the US.

The US law in dispute had been held by the appellate body to be in violation of the Agreement on Subsidies and Countervailing Measures, the Agreement on Agriculture, the General Agreement on Tariffs and Trade and the General Agreement on Trade and Services clauses covering non-discrimination and national treatment between imported and domestic like products.

The ruling had been issued by the appellate board after it had heard a US appeal against the ruling of a compliance panel that the US had not complied with an earlier panel ruling and the recommendations adopted by the dispute settlement body requiring the US to withdraw the subsidies.

Immediately after the January 14 ruling, Mr Lamy had announced in Brussels that the EC would seek WTO authority to impose sanctions involving trade damage to the EC adding up to $4 billion annually.

These sanctions are "automatic" and subject only to arbitration on the amount, which is to be determined by the end of this month.

And then there was the so-called shrimp-turtle case, which is still talked about with much disgust among the greens. Quite simply, the case involved action brought by Thailand, Malaysia and Pakistan against the US, which had banned the import of shrimp products caught in nets not fitted with devices to prevent the accidental killing of turtles.

The three countries accused the US of something called "green protectionism", and walked away with a WTO ruling in their favour in 1998, much to the dismay of environ- mentalists.

But the US has racked up some wins too. For instance, when it contested the European ban on the import of American beef containing certain hormones which, according to the EU, could be carcinogenic.

The US trashed the scientific evidence tendered by the EU and lodged a complaint with the WTO, alleging protectionism. The WTO accepted the US position, ruled the ban illegal and allowed the US to impose retaliatory sanctions of $1.16 million.

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