Absence of progress in global trade negotiations or poor economic conditions historically has generated an increase in World Trade Organization (WTO) disputes. The WTO’s Doha round negotiations are moribund and the global economy continues to weaken. Given this conjunction, plus the new U.S. Administration, we expect a significant increase in disputes in 2009 and 2010, with U.S. companies at the center of many.

Offensively, the Obama Administration will, as promised, initiate more WTO disputes than the Bush Administration. The Administration almost certainly will target China as well as European  restrictions on biotechnology and genetically modified organisms. 

The worldwide slowdown also will engender disputes. Export-oriented businesses will demand increased access to markets with protectionist barriers, including barriers imposed by the stimulus packages of governments around the world. In agriculture, U.S. meats and grains face barriers in the EU, China, Japan, Korea, and many other markets. Regulations impede cross-border and commercial presence provision of telecommunications, insurance and other services in Korea, Indonesia, South Africa, and other countries.

There are certain general conclusions that can be drawn:

•    Virtually every export-reliant U.S. industry faces market access barriers in key markets (or potential markets);

•    The impact is almost certain to worsen during 2009 as the global slowdown intensifies;

•    For many, pursuit of a WTO dispute settlement would be a valuable component of a strategy to weather the storm. The results will not be instantaneous (the process can take one to three years), but the act of bringing a dispute can lead to reduced barriers.

Defensively, 2009 will see WTO challenges to U.S. statutes and regulations. Several trading partners have signaled they may challenge the Buy America provision and alleged subsidies in the stimulus legislation. Whether challenges materialize depends on the details of the procurements. U.S. agriculture barriers (principally protecting cotton, dairy, peanuts and sugar) are likely targets of WTO challenges from countries like Australia and Brazil, which seek to increase their exports to the U.S. 

Historically, petitions by U.S. industries alleging dumping by foreign competitors have increased in economic downturns. There are rumors of a new round of steel petitions; other products will be targeted as well, as will certain countries, such as China. Governments have successfully challenged in the WTO many U.S. antidumping measures. U.S. industries contemplating use of the antidumping remedy must be aware of the prospects and impact of WTO challenges in response. 

Two ongoing WTO disputes are worth noting. First, in a February 2009 decision, the WTO appears to have put the final nail in the coffin of the U.S. “zeroing” policy used to calculate antidumping duties. The result may be lower antidumping duties on many foreign imports.

Second, preliminary decisions are due as early as July in the WTO disputes involving the U.S. allegation that the EU and member states subsidize Airbus’ production of large civil aircraft and the counterpart EU allegation of U.S. federal and state subsidization of Boeing. The direct and indirect impact of these massive, politically supercharged disputes on a vast array of U.S. business interests will be enormous. Absent a settlement, components and parts suppliers and those benefiting from subsidies similar to those ruled WTO inconsistent would be affected directly; many more would be affected indirectly by the political fallout of these decisions.

For many U.S. businesses, the direct and indirect implications of an increasing number of WTO disputes will be significant. Whether a company’s interests are offensive (securing greater foreign market access) and/or defensive (protecting U.S. market position), for years to come many companies’ bottom lines will be affected by WTO dispute settlement activity in 2009. wt



Chris Parlin and David Christy are members of the WTO Group of DLA Piper LLP in Washington, D.C.