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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