Bridges Weekly Trade News DigestVolume 7Number 12 • 2nd April 2003

Dispute Settlement: Panel Rules Against US Steel Tariffs; Panel Established On US Upland Cotton


On 26 March, the interim panel report in the "US - Definitive Measures on Imports of Steel" was issued at the WTO, ruling against US steel tariffs. Early last year, the US imposed tariffs on most types of steel imported from, inter alia, the EU, and a number of countries in Latin America and Asia. The tariffs were ostensibly imposed to re-energise the ailing steel sector in the US. Such actions, referred to as a ’safeguard measures,’ are allowed under Article 5 of the Agreement on Safeguards and Article VI of the General Agreement on Tariffs and Trade (GATT), which also detail the conditions to be met before such a measure is considered justified. According to the report, the US did not meet the conditions and had, in particular: failed to show an increase in imports (in fact, according to the complainants, there had been a decrease in steel imports in the material period); failed to adequately establish the link between imports and injury to its domestic steel industry; and had included import figures from NAFTA countries in its injury investigation even though it had excused Canada and Mexico from application of the safeguard measures.The final report of the panel is due in early May, and if the panel’s findings remain unchanged, the US will be open to the imposition of sanctions of an equivalent value by the EU and the other complainants. However, the US has already indicated that it will appeal an unfavourable decision. This would protract the dispute through the end of 2003.

US upland cotton subsidies challenged

At an 18 March meeting of the WTO Dispute Settlement Body (DSB), Brazil’s request for the formation of a panel in the "US - Subsidies on Upland Cotton" case (WT/DS267/7, searchable at http://docsonline.wto.org) was accepted. The US, which is the respondent, was locked into acceptance but made it clear that it would "mount a vigorous defence against the Brazilian case". According to the US, the dispute "would not give Brazil the result it is seeking". In the dispute, Brazil contends that the subsidies granted by the US government to its cotton farmers — such as marketing loans, export credits, commodity certificates and direct payments — are depressing world prices and are injurious to Brazilian cotton growers. Brazil claims that the cotton subsidies are exempted from the normal immunity granted under the "peace clause" of the WTO’s Agreement on Agriculture (AoA), which protects countries using subsidies that comply with the Agreement from being challenged under other WTO agreements. Article 13 of the AoA exempts domestic support measures that comply with the peace clause from being challenged as illegal subsidies or as nullifying or impairing benefits normally accruing to a WTO Member through dispute settlement proceedings. This immunity, however, only applies as long as the level of domestic support for a commodity remains at or below 1992 levels. Brazil maintains that since 1992, the US has doubled the level of support to its farmers through subsidies programs.

Having endorsed the establishment of the panel at the March 18 meeting, the next step, to be finalised within 20 days, is the selection of panellists. If the parties are unable to agree on the selection — which has been a common occurrence given the heavy-premium-nature of WTO disputes — they are free to request the WTO Director General to do so on their behalf.

"WTO Rules Against U.S on Steel Tariff," NEW YORK TIMES, 26 March 2003. "WTO Sets Up Dispute Panel to Resolve Brazil Case Against U.S. Cotton Subsidies," WTO REPORTER, 19 March 2003.