Although the Doha Round negotiations remain at a halt, the WTO dispute settlement system is working at full pace.

Compliance panel created in US-Brazil cotton case

At its 28 September meeting, the Dispute Settlement Body (DSB) established a panel to determine whether the US had indeed complied with an 18-month old ruling against its cotton subsidy programmes, in response to a request from Brazil. The US had blocked Brazil's first request for a compliance panel at an earlier September DSB meeting, but WTO rules prevent Members from doing so a second time (see BRIDGES Weekly, 13 September 2006).

In March 2005, the Appellate Body confirmed that some US cotton subsidy and export credit programmes violated its WTO commitments and distorted world cotton prices enough to cause 'serious prejudice' to Brazil's trade interests. It set deadlines for compliance later that year. The US and Brazil reached procedural agreements to suspend the latter's requests to impose retaliatory tariffs, following promises from Washington that it was moving to implement the required reforms (see BRIDGES Weekly, 23 November 2005).

Brazil now contends that the US has failed to adequately comply with the ruling -- charges hotly denied by the US. Washington points out that it has canceled the prohibited 'Step 2' payment programme -- subsidies to US mills and exporters to buy more expensive domestically-produced cotton. Brazil counters that the US has taken no action to reform certain export credit programs that had been deemed WTO-incompatible. As a result, it has turned once again to the dispute settlement system.

China blocks panel request in auto parts case

At the same DSB meeting, China blocked an initial request from the US, the EU and Canada for a panel to examine its tariff treatment of imported auto parts (see BRIDGES Weekly, 20 September 2006). The claimants charge that China's tariff policies discriminate against imported auto parts, and, as a consequence, discourage domestic auto manufacturers from using imported parts. This marks the first formal filing against China since its accession to the WTO in 2001. Previous spats have been settled through informal consultations or in the pre-litigation phase. Trade analysts say that the economic potential of China's huge auto industry has the full attention of the complaining Members, and expect them to file an unblockable second request in the near future unless an understanding is reached shortly.

US blocks Thai request in shrimp antidumping case

Thailand, too, contributed to the line of panel requests when it formally challenged the US in yet another case targetting Washington's use of the so-called 'zeroing' methodology when determining the antidumping duties it has levied on Thai shrimp imports since January 2005. The US claims that Thailand is dumping shrimp on the US market, i.e., exporting it at prices below those in its own domestic market.

Bangkok argues that zeroing distorts the calculations and is inconsistent with the WTO Anti-dumping Agreement, because it ignores ('zeroes out') instances where prices are lower at home than in the export market, ant takes into account only cases where the 'dumping margins' are positive, i.e., instances where shrimp prices are higher in Thailand than the US. The Appellate Body has previously ruled against the US' zeroing methodology. Thailand is also challenging the 'bond' requirement which forces exporters to give the US government more than 10 percent of the value of annual exports to hold for one year (see BRIDGES Trade BioRes, 28 April 2006). The US blocked the initial request; it will not be able to do so a second time.

The next DSB meeting is scheduled for 26 October.

ICTSD reporting.