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World Trade Organisation (WTO) Rules and Dispute Settlement

Crucially, the WTO provides for the effective enforcement of its rules and agreements through a Dispute Settlement system, the results of which are binding on all parties. It provides for consultations, Panels and if necessary, Appellate Body proceedings. WTO members have agreed that if they believe fellow members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. This means abiding by the agreed procedures and respecting rulings.

The rules are set out in the WTO Dispute Settlement Understanding (DSU). The DSU emphasises that prompt settlement of disputes is essential if the WTO is to function effectively. It sets out in considerable detail the procedures and timetables to be followed in resolving disputes. If a case runs its full course to a first ruling, it should not normally take more than about one year - 15 months if the case is appealed.

Rulings are automatically adopted unless there is a consensus to reject a ruling - any country wanting to block a ruling has to persuade all other WTO members (including its adversary in the case) to share its view. Although much of the procedure resembles a court or tribunal, the preferred solution is for the countries concerned to discuss their problems and settle the dispute by themselves.

Further  details of the dispute settlement process can be found on  Dispute Settlement section of the WTO website in related links section of this page.

Current Disputes

1.Airbus/Boeing

Both the EU and the US are challenging the level of subsidy each affords to its commercial aircraft industry.

Panels have been established in both cases.The complexity of the issues involved makes it difficult to assess when outcomes can be expected. However, it remains the UK’s desired wish that even at this late stage that a mutually acceptable solution can be found without recourse to DSB panel deliberations.

2. US Continued Dumping and Subsidy Offset (Byrd) Act - so-called "Byrd amendment"

Latest Position:

On 1 May 2007, the retaliation that the EU has had in place since 1 May 2005 against the US's continued use of the so-called 'Byrd Amendment' will undergo a further increase. This is due to both an increase in funds distributed under the terms of Byrd in the US during 2006, and to the accession of Bulgaria and Romania to the EU, which means that the trade damage experienced by these countries because of Byrd is now also subject to EU retaliation.

A further thirty two codes from the Annex II list will therefore be added to the active retaliation date from 1 May 2007. This means that these goods will attract an additional 15% import duty when these goods originate in the US, in the same way as those already subject to retaliatory measures. Identical and similar goods of origin other than the US will not be affected by this action.

Background:

The US "Byrd Amendment" signed into law in the US in October 2000 provides that the proceeds from antidumping and countervailing duty cases shall be paid directly to the US companies responsible for bringing the cases (rather than to the relevant US Government Treasury Department).

The EU successfully challenged within the WTO that payments under the "Byrd Amendment" constitute an illegal subsidy to US business. Following continued US non-compliance with this ruling, the EU applied in January 2004 to preserve its rights to apply retaliatory measures against the US. The WTO Arbitrator determined that for each year that the US continues not to comply with the WTO ruling, the EU should be entitled to retaliate up to an amount equal to 72% of the US disbursements to its domestic industry arising from anti-dumping or countervailing duties imposed on EU goods under the Byrd Amendment in the preceding year. Accordingly, the amount of EU retaliation varies from year to year.

The European Commission therefore adopted Council Regulation (EC) No. 673/ 2005 which became active on 1 May 2005. This Regulation provides for retaliation in the form of an additional 15% ad-valorem duty on a range of products originating in the United States of America upon their entry to the EU.

On February 1 2006, the US repealed the Byrd Amendment as part of the US Budget Deficit Act 2006. However, the repeal legislation provides a transition period of until September 2007. In other words, Byrd duties imposed on goods entering the US until that date will continue to be distributed to US companies. In reality, it will be considerably longer before these disbursements are complete.
On 26 April 2006, in line with an increase in the value of Byrd disbursements in the US during 2005, the Commission adopted Council Regulation (EC) No. 632/2006 which additionally applies this level of ad-valorem duty to a further eight tariff lines at the eight digit level.

We are keeping everyone who has told us that they have an interest in this issue informed by e-mail.

3. Brazil: retreaded tyres

In June 2005, the EU requested WTO consultations with Brazil on its measures affecting the import of retreaded tyres from the EU. Brazil maintains an import ban on retreaded tyres, and imposes fines on those that are imported. However the use and of retreaded tyres originating in Brazil and other Mercosur countries remains unaffected. Consultations proved ineffective in resolving the issue, and the EU therefore, requested a Panel, which was established in January 2006, and is expected to report its findings around April 2007.

4 . Beef Hormones

Following an earlier Panel ruling against the EU in a case brought by the US and Canada against the EU’s ban on the use of beef hormones in stockfarming, the EU adopted Regulation 2003/74/EC, which addresses this issue.

However, the US and Canada maintain that the EU is still not within WTO compliance, and continues to apply retaliatory measures in the form of increased tariffs on imports to the US of certain EU-origin goods. They have refused to address this issue through the usual means (Article 21.5 of the DSU). The EU has therefore requested a Panel to determine whether the continuation of these retaliatory measures constitutes a breach on behalf of Canada and the US of their WTO obligations.

The UK has not been targeted specifically by the US and Canadian retaliatory measures.

5. Farmed salmon

Norway has challenged definitive EU anti-dumping duties aginst imports of farmed Norwegian salmon. DSB panel hearings are underway and the panel is expected to report in the middle of 2007.

Contacts:

Andy Weller
Tel: 0207 215 2321
Fax: 020 7215 2325
Email andy.weller@dti.gsi.gov.uk

Toni Woodger
Tel: 020 7215 2326
Fax: 020 7215 2235
Email toni.woodger@dti.gsi.gov.uk