World Trade Organization Works All Right - Contrary to U.S. Interests

Article excerpt

Sherman E. Katz ("The quiet ways the WTO is working well," Op-Ed, April 12) argues that because of the increased authority of the World Trade Organization (WTO), governments now desire to settle disputes "out of court" rather than risk formal rulings. This may be true, but Mr. Katz' claim that this is beneficial to the United States is wrong.

Under the General Agreement on Tariffs and Trade (GATT) before the WTO existed, governments were encouraged to negotiate settlements precisely because no terms could be imposed on them by a supposedly "higher" authority. Diplomacy is normally preferred to conflict. The real issue is how the creation of the WTO has changed the basis on which settlements will be negotiated.

Without a WTO, the process was power-based, with the advantage going to the nation with the most leverage. As the world's largest economy, with the most attractive market and highest volume of trade, the United States possessed the most leverage. With the WTO, the system is now rules-based and operates on the legal fiction that all nations are equal. Under this system, the United States is forbidden to use its strength, or may only use it after it gains the permission of a WTO panel.

A case in point is the U.S.-Japanese auto and auto-parts negotiations, in which Tokyo effectively used the threat of a WTO appeal to counter the traditional muscle the United States was flexing with its threat of sanctions. As a result, the United States got less than it could have gotten had it felt free to place its full power behind its agenda.

The desire to shift from a power-oriented to a rules-oriented system was common among WTO supporters. Much of the basis for the WTO came from the work of University of Michigan law professor John H. …