EU trade disputes

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Contents 1 What is a trade dispute? 2 Dispute Settlement Body 3 Resolving Disputes 4 US-EU Disputes 5 Banana Import Dispute (1999) 6 Other EU disputes 7 Bra Wars 8 Dangers of Protectionism 9 Notes and references

[edit] What is a trade dispute?

A dispute between two governments where one believes the other to have violated an agreement or commitment to the World Trade Organisation (WTO).

[edit] Dispute Settlement Body

• Within the WTO is the Dispute Settlement Body, which aims to settle the trade disputes.
• Consists of all WTO members.
• Has the authority to establish panels of experts to consider cases. Experts are picked from a pool, or in special cases can be anyone deemed relevantly qualified.
• Can accept or decline the panels findings, but to decline the panel findings would require the consensus of all member. This is unlikely as this entails the two (or more) parties also agreeing to dismiss the panels conclusions.

[edit] Resolving Disputes

• If the government is successful in its accusation, then the defending government has to adapt its policy to comply with the ruling.
• Compensation in the form of sanctions to the value of the loss occurs by the aggrieved government can be applied. Mainly applied when limited to the sector of the economy that is under dispute, and often are only sanctioned when the government is unable to rectify the situation within a reasonable time.
• Non-compliance results in the sanctions, or further sanctions if they have already been applied.
• Governments can appeal against a decision on points of law, but ultimately the body’s decision is legally binding.
• This is an inadequate method for small countries who win decisions against major economies. A country such as America is barely affected by sanctions by small economies, for example Iceland.

[edit] US-EU Disputes

• There have been several high profile disputes.

1. Banana Import Dispute
2. Beef Hormone Dispute (see Sanitary and Phytosanitary Agreement)
3. Steel Import Tariffs

• But a wider dispute revolved around Bill Clinton's decision to reactivate section 301 of the US Trade Act. This act gave the US the ability to apply unilateral sanctions against any country it felt was violating trade agreements or unlawfully affecting US trade.

[edit] Banana Import Dispute (1999)

• The US objected to the import policy of the EU regarding bananas.
• They argued that the preferential treatment of former colonies of Caribbean countries was unlawful.
• This is despite the Caribbean having only 7% of the market compared to 75% for Latin American producers.
• America objected to this because many of the Latin American growers were financed and marketed by US companies. Especially since a major US company, Chiquita, was going bankrupt. Moreover, it is reported that Chiquita, a long term republican backer, gave a donation of $500,000 to the democrate party who were in power at the time.
• America threatened to place a 100% import tariff on several EU products, even before a WTO decision.
• The sanction evntually came into force after the WTO ruled in America's favour.
• This affected $191m of EU exports to America, and was mainly limited to luxury goods, including:

1. Italian Cheese
2. Danish Hams
3. French Handbags

• Scottish Cashmere was also originally on the list but a plea by Prime Minister Tony Blair gave it a last minute reprieve. However, a rotation of products had been proposed which would have moved the tarrif to Scottish Cashmere and damaged the £1.25m US export industry.
• After negotiation the EU moved to a system based on prior trading history.
• This was the system that the US originally had desired, and was based on the years 1994-1996.
• In return the US dropped its sanctions.

[edit] Other EU disputes

• As well as with the US, the Eu is involved with several disputes with other governments:

1. Textiles Dispute (China)^[1]
2. Leather Shoes Dispute (China & Vietnam)
3. Sugar Subsidy Dispute (Australia, Thailand, Brazil)

[edit] Bra Wars

• 'Bra Wars' is a media coined term referring to the textile dispute between the EU and China in 2005.
• China is able to produce very cheap textile goods due to, amongst other things, low labour cost.
• This means that the Chinese imports were able to undercut the EU domestic producers.
• A worldwide quota system was abolished at the beginning of 2005, which led to a rise in textile exports from China.
• In order to protect its domestic producers, particularly French and Italian manufacturers, the EU imposed a quota system of its own.
• The allocated quota for 2005 had already been reached so textiles were blocked at EU ports.
• This was equally damaging to European businesses who were relying on the shipments for the summer season stocks.
• Urgent talks were instigated when the Prime Minister Tony Blair was due to fly to China.
• From these talks came a compromise agreement whereby half of the imports were borrowed from 2006's quota, and the rest were allowed in freely.

[edit] Dangers of Protectionism

• The danger of the EU adopting protectionist measures is that retaliation often follows.
• This can cause more damage than having free markets.
• Although, bans against GM crops and hormone-treated beef for health reasons may serve a greater good. Though no solid evidence has been provided to prove that there is a danger to health.
• Furthermore, protectionism leads to bilateral trade agreements as opposed to the multilateral agreements that the World Trade Organisation champions. This can discrimante against LDC's who have little to offer in return for favourable trade conditions.

[edit] Notes and references