Avoiding International Economic Interdependence: The EC and U.S. Try to Turn Protectionist in the Uruguay Round

By Horlick, Gary N. | Law and Policy in International Business, Summer 1993 | Go to article overview

Avoiding International Economic Interdependence: The EC and U.S. Try to Turn Protectionist in the Uruguay Round


Horlick, Gary N., Law and Policy in International Business


David Palmeter and Gregory Spak's article raises important issues about both international dispute resolution and, more generally, the role of trade laws in managing international economic interdependence.(1) This comment attempts to balance Palmeter and Spak's article with a practitioner's personal experiences and observations.

I. DISPUTE RESOLUTION

As the authors point out, the dispute resolution question is not limited to antidumping, but instead poses a more general question of approach in international economic relations--whether interdependence should be managed by a legalistic international process, like the dispute settlement mechanism contained in the Dunkel Draft,(2) or should be handled more softly through diplomacy.

As the authors point out, the United States became frustrated in the 1980s when diplomacy did not pay off. It is not surprising that Clayton Yeutter was U.S. Trade Representative when the United States really started to put pressure through the Uruguay Round to improve the dispute resolution process. Mr. Yeutter had been Deputy U.S. Trade Representative in the 1970s, had a strong agricultural background, and believed that the United States was clearly losing rights it should have had because of failures in the GATT dispute resolution process.(3)

Predictably, the U.S. government wants tough dispute resolution when it wins and wants nothing or something much more deferential when it feels guilty. For example, the U.S. government thinks it is in good shape on patents, so it wants tough dispute resolution for this area. The main reason the intellectual property community is interested in the GATT is because of binding and effective dispute resolution. Otherwise, they could go back to the World Intellectual Property Organization (WIPO) and have non-binding dispute resolution.

On the other hand, the U.S. government clearly has a guilty conscience about antidumping laws, and therefore it wants to gut the binding dispute resolution process to the maximum extent possible. For any GATT historian, the joke is that there is a long history of countries vehemently insisting on GATT provisions that turn out to hurt them later. One prime example is the agriculture rules, which the United States wrote.

I believe I can safely predict, based on that past history, that the U.S. government's insistence on diplomatic dispute resolution in antidumping disputes and binding dispute resolution process in patents will turn on its head, and that U.S. businesses will suffer because of both.

II. THE ROLE OF TRADE LAWS IN MANAGING INTERNATIONAL INTERDEPENDENCE

Turning from the procedure to the substance, the theoretical justification for antidumping and countervailing duty laws is that they serve as an interface between different economic systems. Unfortunately, neither set of laws in the United States and elsewhere is designed for that purpose. Instead, the laws do both too little and too much.

A. Countervailing Duty Law

The obvious flaw in countervailing duty law is that it only affects imports into a country. As an example, consider U.S. countervailing duties on foreign computers. The duties would affect foreign computers imported into the United States, but they do nothing about subsidized foreign computers being sent to the U.S. computer industry's export markets. The U.S. countervailing duties also do not help U.S. exports to the countries on which the duties were imposed.

As a result, the people who really care intensely about countervailing duty law and countervailing duty cases are those companies who want to protect their domestic markets, such as integrated steel mills in the United States, or wheat farmers in Brazil, which has imposed countervailing duties on U.S. wheat imports.

The other problem with countervailing duty law is that it does not restrain subsidies in one's own country. A prime example is the automobile industry. …

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