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Why Is The Dispute Settlement Body Of The Wto So Important? Does Experience Suggest That Big Players Can Ignore The Rules?

1646 words - 7 pages

The Dispute Settlement mechanism of the World Trade Organisation (WTO) came into effect in 1995 with a new rules-based system enforcing all WTO members to adapt the same basic standards for global trade. However, the champions of free trade: the US (United States) and the EU (European Union) have both been found guilty of protectionism on separate accounts despite having proclaimed to be ardent protagonists of a rules-based trading system. Several disputes have arisen with the result of WTO intervention where the so called 'big players' have violated agreements and trade rules, instigating punitive measures. Four controversial cases I am going to talk about involve leading members of the WTO (the EU and the US) having decided to ignore its rulings and resulting in WTO intervention. These cases have displayed political drive as well as protectionist motives and demonstrated the use of the Dispute Settlement Body: Firstly the situation of President Bush's decision to impose tariffs due to the US' ailing steel industry, secondly and most recently the US' controversial illegal export subsidies. Two more cases this time highlighting the EU's failure to adhere to WTO ruling are its refusal to run scientific tests on hormone treated meat case in 1999 and the banana export dispute in 1997 between the US and the EU.The DSU (Dispute Settlement Understanding) is a very important entity of the WTO- it can be seen as the body that gives substance to the agreed trading rules of the WTO: The ICC describe it as 'a cornerstone of the multilateral trading system '. The rationale behind this system derives from a rules-based system- the rules defined by the WTO must be complied with by its members or else trade sanctions in the form of duty increases or suspension of WTO obligations are implemented. This helps members avoid trade wars- in fact so far the EU has regularly turned to the DSU to solve important disputes. This deterrent is an essential feature of the World Trade Organisation since it ensures members respect their commitments and guarantees equal treatment. The benefits of this mechanism also include the expeditious nature of the system which contributes to its effectiveness. Furthermore the DSU mechanism is a multilateral system which saves the smaller countries from losing out due to unilateral action.Recently the Dispute body of the WTO has experienced the most politically-driven case it has been approached with yet, leading the US to ignore WTO standards in order to rally support in the mid term presidential elections. In March 2002 the US imposed severe restrictions on the steel industry with import tariffs as high as 30 % from the rest of the world in order to give its ailing industry some time to restructure and cut costs, benefiting key steel producing states such as Pennsylvania and Ohio. The European Union Trade Commissioner Pascal Lamy referred to this as 'Unfounded, unnecessary and unfair US action ' consequently forcing the EU to take the...

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