September 28, 2002

A leading Senate Democrat on trade issues has criticized the World Trade Organization (WTO) dispute-settlement process for exercising bias against the United States and for acting beyond its authority.

In a September 26 speech to the Global Business Dialogue in Washington, Senator Max Baucus, chairman of the Finance Committee, said that, time after time in challenges to U.S. trade laws, WTO dispute-settlement panels have disregarded the standard of review requiring them to defer when national authorities make reasonable interpretations of fact and WTO rules.

He cited WTO rulings overturning decisions made under Section 201 of U.S. trade law, which authorizes imposition of temporary tariffs for industries as a safeguard against a surge of fairly traded imports.

He cited the ruling against the Byrd amendment, which diverts antidumping duties from the general treasury to the industries that petitioned for antidumping investigations.

He cited the ruling against the way that the U.S. Department of Commerce calculated prices for a subsidy investigation on imports of softwood lumber from Canada.

And he cited the ruling against the Foreign Sales Corporation (FSC) and successor law giving tax breaks for certain exports by multinational companies.

"WTO dispute-settlement panels are legislating," Baucus said. "They are ignoring the deferential standard of review. They are exceeding their powers to add to the obligations and diminish the rights of the United States."

He predicted that, even if the United States loses the Byrd amendment case on appeal, Congress would refuse to implement the WTO decision.

"I frankly think there is a bias against the United States and its trade laws within the WTO dispute-settlement system," Baucus said. "WTO dispute-settlement rules and procedures have proved inadequate to guard against bias and overreaching by panels."

Baucus recommended that the United States press in ongoing WTO negotiations for reforms in the dispute-settlement process that would punish decisions that ignore the standard of review.

He recommended also that the United States should form its own group to review the legitimacy of WTO dispute panel rulings.