Zoellick waves a big stick

Nothing is so damaging to the credibility of the WTO’s trade regime as a lack of respect for it’s provisions by the major economies. The U.S. Deputy Secretary of State, who should know better, has threatened a unilateral ‘preemptive’ strike at Brazilian tariff preferences in the U.S. market if Brazil proceeds with a request—that it is entitled to make—for a decision by the WTO Dispute Settlement Body on the Upland Cotton dispute.

Brazil is seeking approval for it’s request to ‘withdraw concessions’ worth at least $3US billion to the USA because, it says, the USA has not implemented the decision of the WTO’s Dispute Settlement Body on the cotton case in the time required. Whether this contention is right or wrong, Brazil certainly is entitled to ask for the WTO ruling. But the U.S. government is threatening a unilateral measure—incidentally outlawed by the WTO Understanding on Dispute Settlement—if Brazil appeals to WTO for it’s right of due process.

The United States may retaliate by removing trade preferences worth more than $2 billion if Brazil insists on asking the World Trade Organization (WTO) for the right to impose $1 billion in sanctions on U.S. goods in a row over cotton, a senior U.S. official said on Thursday. (ABC News)

There has been a degree of needling going on over the implementation of the WTO decision in this dispute that has a political element on both sides. The July meeting of the Dispute Settlement Body saw one round in which both sides indicated that they might seek arbitration on the length of time the U.S. might take to put an end to the export subsidy effect of its Commodity Credit Corporation programs and to the direct domestic subsidy involved in the so-called ‘Step 2’ program.

There has been no WTO approval of any ‘retaliation’ yet. The Brazilian Foreign Ministry claims that the “reasonable period of time” for the implementation of the WTO ruling expired on 21 September. If that is correct, Brazil is within it’s rights under the Agreement to seek a decision by the Dispute Settlement Body.

But even if Brazil is being litigious in this case, as Zoellick claims, it is inappropriate and contemptuous of the Dispute Settlement process, for the U.S. to threaten unilateral measures against a WTO Member that choses to exercise it’s rights.

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