Bottom Line on WTO Still Shaky for U.S.

In any other league, America’s record of 22 wins and 2 defeats would leave no doubt about which team would win the trophy. But in the global arena known as the World Trade Organization, the stellar U.S. won-lost record obscures a murkier reality.

Just ask U.S. cattle ranchers. The WTO recently ruled in their favor against Europe--but lacked the leverage to pry open European markets to American beef.

“We are very frustrated--but what are our options?” asked Alisa Harrison, spokeswoman for the American Cattlemen’s Beef Assn. The WTO, she said, “is the only game in town.”

Delegates from the WTO’s 135 member nations have converged on Seattle this week to try to set an economic agenda for the coming years.

Today, an array of special-interest representatives will tell WTO officials that they have failed to consider the needs of workers, the environment and the world’s poorest societies in setting economic policy. Throughout the week, the WTO will be under great pressure to open up its largely secret efforts to resolve disputes between its members.

President Clinton is expected to arrive Tuesday during a major protest demonstration by organized labor. By Friday, delegates to the WTO hope to announce the launching of a “millennium round” of negotiations aimed at slashing a range of trade barriers between nations.

In the welter of protests leveled at the WTO, scant attention has been paid to whether U.S. interests have profited or lost at the hands of the organization--a matter of crucial importance for many billions of dollars in global commerce and, less tangibly, for America’s stature as the world’s most influential economy.

A review of the record and interviews with trade experts suggest the answer is as mixed as the results of the beef case.

“The jury is still out,” said Timothy M. Reif, trade counsel for Democrats on the House Ways and Means Committee. “There are clearly some cases where U.S. industry walked away happy, yet we’ve won some cases where we haven’t gotten any satisfaction at all.”

The United States has played the WTO game more vigorously than any other country. It has lodged 60 complaints of unfair trade against its trading partners, with the EU second at 47, according to analysts in Geneva. Of the complaints that have been resolved, the U.S. has won 22 and lost 2.

Separately, the United States has been named the defendant about 14 times, leading to five U.S. losses and nine settlements.

Lost Cases the More Important, Expert Says

Two of the outright U.S. losses have been major: Kodak’s bid to break through Japan’s web of informal trade barriers to film sales, and a high-stakes tax case that could cost American firms more than $2 billion in tax benefits. And environmentalists lament losses involving clean air regulations and a U.S. law to protect sea turtles from getting snagged in fishing nets.

“We’ve certainly won cases in the World Trade Organization, but the cases that we’ve lost have been more important than the cases that we’ve won,” said Alan Tonelson, a research fellow at the U.S. Business and Industrial Council.

And some of the victories--notably that of the cattle ranchers--have turned out to be hollow.

For years, the European Union has prohibited the sale of U.S. beef from cattle fed with growth hormones, insisting that hormones made the beef dangerous for human consumption.

In January 1996, prodded by the ranchers, U.S. trade officials formally complained that Europe’s restriction against hormone-fed beef was an illegal trade barrier masquerading as a health regulation. Over the next two years, Europe lost initial rulings and an appeal.

The WTO finally gave the Europeans a choice: Open your markets to American beef or face high tariffs that would effectively block more than $100 million worth of European exports to the United States. Europe chose the high tariffs, leaving American ranchers still on the outside.

Europe reacted in much the same way when it lost a U.S. challenge to its effort to shield banana-growing former colonies in the Caribbean from competition.

Likewise, the United States prevailed against Argentina over discriminatory tariffs aimed at shoes, clothing and textiles. But Argentina has managed to retain some of the barriers.

Some trade experts are beginning to speak wistfully of the pre-WTO era, when the United States relied more on raw economic muscle than on the Geneva legal system to pry open resistant foreign markets.

“We lost enormous leverage by adopting this system,” said Alan Wm. Wolff, former deputy U.S. trade representative and now an attorney in Washington. “If the current rules were in place [in the 1980s], U.S. semiconductors would not have gained access to the Japanese market.”

The WTO system, he continued, can serve as a U.S. tool but “is not as satisfying as we thought it would be. . . . I think we missed the fact that diplomacy has a role. Certain things have to be negotiated to a solution.”

The WTO, which came into existence in 1994, was intended to be the first trade referee with the ability to make its findings stick. In a sharp departure from the previous approach, losing parties lost the right to block rulings, including financial sanctions, unless they were joined by a consensus of WTO members, a nearly impossible test to meet.

That position as final arbiter, which was supported by officials in the Bush and Clinton administrations, is at the heart of charges that the WTO is a kind of world government and that its rulings have eroded the sovereign rights of nations to determine their own policies. The powers are typically exercised by three-member panels made up of politicians, economists, lawyers and professors.

American leaders assumed that the relatively open U.S. economy would prosper in such a system, and that the United States would lodge grievances much more often than it would be named in other countries’ complaints, recalled C. Christopher Parlin, the U.S. legal advisor during negotiations to establish the WTO. “Countries--like people--are much more willing to respond to a negative decision that is imposed under rule of law than one that is imposed under the might of an opponent,” Parlin said.

In a resounding American victory, Japan in 1997 settled a U.S. complaint that it was ignoring copyrights of recorded music from the 1950s and 1960s. The case highlights a key point made by WTO advocates--that individual cases or the mere threat of cases can echo through the global economy, paying rewards that are much greater than the issue at hand. While U.S. officials said the Japanese copies were costing the recording industry $500 million a year, the precedent established by the settlement has been of vastly greater value.

“It led to changes in Taiwan, [South] Korea, Hungary and Poland,” said Neil Turkewitz, a vice president of the Recording Industry Assn. of America. Ukraine and Russia are addressing copyright infringement, he said. The WTO challenge, he concluded, has been “tremendously successful.”

To cite a few more victories: U.S. officials successfully challenged Canada’s attempt to restrict the access of American magazines, India’s disregarding of patents for American drugs and chemicals, South Korea’s use of food safety requirements as a device to keep out pork and other food imports and Japan’s excessive taxation of alcohol imports.

Yet some observers believe that America’s losses have gone a long way toward offsetting such wins. The United States suffered a stinging defeat in 1997, when a WTO panel rejected an American charge that Japanese bureaucrats relied on a web of informal practices to keep out imports of foreign film. U.S. officials were particularly miffed that the WTO panel seemed to reward Japan for keeping its protectionist strategies off the record, ruling that such unofficial communications could not become part of the case. “It was an absurd shifting of the burden of proof” away from the defendant, a trade official complained.

Earlier that same year, the United States also lost a challenge from Venezuela to the Clean Air Act. The judges ruled that the Environmental Protection Agency discriminated against foreign refineries in the type of data it was demanding. The EPA then modified its rules--satisfying critics who agreed that the data requirement was discriminatory, but enraging environmentalists who argue that the ruling ultimately could allow dirtier gasoline into the United States.

Ruling on Tax Break Has Huge Implications

In another case with huge implications, a WTO panel in September endorsed a complaint by Europe that a type of U.S. tax break widely employed by big corporations amounted to an illicit export subsidy. General Motors, Boeing and many other major firms that operate overseas used the Foreign Sales Corp. provisions to get $2.5 billion in tax breaks, affecting $250 billion in exports.

“If this is upheld on appeal, it could be explosive,” Parlin said.

For all the concerns that the WTO is eroding national sovereignty, its legal process has not yet overturned Europe’s barriers to bananas, which were challenged by the United States on behalf of such U.S.-based growers as Chiquita and Dole.

The United States won the case in May 1997, prevailed on appeal four months later, and last April was given approval to retaliate with 100% tariffs on $191 million worth of European imports a year. But the banana restrictions remain in place.

“It’s certainly not an absolute victory,” said Andrew W. Shoyer, an attorney and supporter of the system, “at least not yet.”