Peter Gallagher

meta-creation_date: 12 Novem­ber, 2003
JQ has appar­ently “con­vinced himself”:http://mentalspace.ranters.net/quiggin/archives/001358.html that the WTO’s rejec­tion of the US steel safe­guard action could spell “the end of the line” for the Orga­ni­za­tion. bq. As I’ve pre­vi­ously men­tioned, the WTOmade lots of ene­mies by over­reach­ing itself in the 1990s, on the assump­tion that big-country gov­ern­ments would always back it up in the end. The wis­dom of that assump­tion is now being tested. It’s a some­what pre­ma­ture obit­u­ary. The big coun­tries back the WTO because they believe it’s in their own inter­ests to do so: the for­eign pol­icy costs of return­ing to more tra­di­tional forms of set­tling trade con­flicts (remem­ber WWII?) are too big. They much pre­fer dis­pute set­tle­ment. What’s the evi­dence on dis­putes? Over and over, in the 8 years of WTO’s exis­tence, the US, EU and Japan have com­plied with deci­sions against them (see the score­card[⇒ related story] in my ear­lier story). Even in multibillion-dollar cases such as the EU ‘bananas’ case (a $50 bil­lion indus­try at EU whole­sale prices) which the EU lost. Com­pre­hen­sively. Three times. To devel­op­ing coun­tries. JQ says the ‘WTO made a lot of ene­mies’. It’s cer­tainly true that there are thou­sands of people—let’s say, even a mil­lion or two—wiling to make a lot of noise, destroy some prop­erty, cause dis­rup­tion and even com­mit sui­cide to express their objec­tions to WTO. But the pre­pon­der­ance of evi­dence points, nev­er­the­less, to the wild pop­u­lar­ity of WTO. Since the 1990’s the WTO mem­ber­ship has expanded from about 110 gov­ern­ments to nearly 150; and there are 27 more coun­tries press­ing to get in. So who exactly do it’s ‘ene­mies’ rep­re­sent? On whose behalf do they fight? The steel case is far from an exam­ple of ‘over­reach’. The Appel­late Body that decided this case against US steel pro­tec­tion was set up with sup­port from the USA and EU in 1994. In this case it did noth­ing more than inter­pret a rule that has been in place, with US sup­port, since 1948. In fact, from a legal point of view, this case was a replay (more or less) of the WTO deci­sion on US bar­ri­ers to Aus­tralian lamb ear­lier this year; a case that didn’t bring any sim­i­lar pre­dic­tions of doom. Is there, in fact, any­thing that jus­ti­fies Quiggan’s skep­ti­cism? Where the big pow­ers are con­cerned, the hon­est answer is ‘prob­a­bly’. Lots of things. Bush may well try to ‘tough it out’ over steel. But, JQ’s instincts aside, the evi­dence still points in the other direc­tion. There are only two WTO dis­putes where the loser has not com­plied (yet) with the rul­ing: one involv­ing an EU ban on imports of US beef allegedly con­tain­ing growth hor­mones (it doesn’t) and one on the US income-tax sub­sidy to firms that own off-shore export cor­po­ra­tions. The US has with­drawn retal­ia­tory action on the Hor­mones case and the EU, although ‘huff­ing and puff­ing’, has not yet taken any retal­ia­tory steps on FSC. Why? Because the for­eign pol­icy costs are high and retal­i­a­tion sim­ply penal­izes con­sumers in the coun­try tak­ing the action: it doesn’t resolve the prob­lem. But even with­out retal­i­a­tion, the two big pow­ers have suf­fi­cient rec­i­p­ro­cal lever­age to keep the pres­sure up. The EU is stonewalling on hormone/beef, so the US Con­gress is dick­er­ing over means to resolve the FSC tax prob­lem (it’s made three attempts). At the moment, they’ve fought this to a stand-off. What­ever hap­pens, expe­ri­ence sug­gests that they will avoid seri­ously under­min­ing the cred­i­bil­ity of the WTO sys­tem of rules and dis­putes. They both under­stand only too well what China might do in future if they weaken the WTO.