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How much does the Doha Round deadlock raise the heat on WTO disputes?

Since the talks amongst the “G-4” members (Brazil, the EC, India and the USA) were abruptly interrupted last June in Potsdam, the WTO Doha Round negotiations have been in a deadlock.

Following the line dropped by WTO Director-General Pascal Lamy that prior convergence among “G-4” members would have been helpful, but not indispensable, as the negotiation is a mutual endeavor for all of the international organization’s 150 members, attempts to revive discussions were performed.

Accordingly, the chairpersons for Agriculture and NAMA (Non Agricultural Market Access) groups circulated negotiating texts filled with proposals but consensus still seems far from reality. Some experts even speculate that the round might be going into hibernation due to domestic political issues in some countries. If the latest events foreshadow that cold weather is in store for the Doha negotiations, one can clearly note a sudden rise in the temperature of WTO disputes, at least when it comes to the Brazilian participation.

Indeed, the fourth most vigorous user of the mechanism is currently involved — both as claimant and respondent — in a myriad of new and ongoing cases. On July 11, 2007 Brazil filed for consultations (DS365) with the US regarding the latter’s domestic support and export credit guarantees on a wide range of agricultural goods, such as wheat, corn, sorghum, cotton, rice and livestock.

Brazil argues that in the past years (i) the US has exceeded its permitted levels for trade-distorting farm subsidies and (ii) some American export credit guarantees consist of prohibited subsidies. Brazil also announced that the WTO, in a secret and still preliminary report, concluded that the US has not complied with most of the rulings in the cotton case (DS267), which was deemed to be a milestone in opposition to governmental farm support.

Should this finding be confirmed, after a likely appeal from the US, the Brazilian authorities might seek the right to retaliate the American government. Moreover, Brazil has recently joined as an interested third party in the dispute between the US and the EC concerning subsidies in large civil aircraft trade (DS 316).

As the third largest manufacturer of civil aircraft, Brazil is concerned about trade distortions caused by financial support (“launch aid”) in the form of loans on preferential terms and assumption/forgiveness of debts, given to Airbus by the EC government.

On the other hand, the WTO established on July 24, 2007 a panel to examine the Brazilian investigation that lead to the imposition of anti-dumping measures on Argentinean exports of material used to produce plastic bottles (PET resin).

According to the complaint (DS355), such investigation was inconsistent with several provisions of the WTO Anti-dumping Agreement, as best information available, price undertaking and time-limit of the investigation.

Furthermore, the EC has made public its decision to file in September an appeal from the panel report on the retreaded tyres case (DS332), which acknowledged Brazil’s right to restrict imports of used tyres on environmental protection grounds.

Nevertheless, the EC argues that exceptions in the Brazilian regulation violate WTO rules as they create a grey area through which imports are made. This intense movement recently observed in the WTO dispute settlement system poses an intricate question: how much does the deadlock in the Doha Round influence members to resort to litigation as an alternative to obtain effective gains in international trade? Undoubtedly, some of the above-mentioned disputes, such as the new agricultural conflict and the retaking of the cotton case, are directly connected with the delay in achieving the Doha Round goals.

Most of the present indetermination in the Round can be attributed to the lack of advance in the agricultural negotiations. Since agreement has not yet been reached in defining the new caps on farm subsidies, Brazil has decided to initiate a new dispute, aiming at repeating the success achieved in the cotton precedent.

Clearly, had the talks evolved into concrete results, Brazil would hardly have presented this new case, at least at this stage. Likewise, in August 2006, right after the Doha Agenda was suspended indefinitely because of entrenched positions between key players, Brazil re-activated the cotton dispute by requesting the establishment of an implementation panel to analyze American compliance with the WTO rulings. In both cases, the failure of the Round to deliver evidence of a successful conclusion and the belief that a positive outcome in litigation would prove effective to discourage the indiscriminate use of farm subsidies were decisive in the Brazilian resolution to set the WTO dispute system in motion.

However, such conclusion could not be extended to all the disputes described above. For instance, the PET Resin, the Retreaded Tyres and the Aircraft cases have little to do with the current status of the talks, as the rules on the table would scarcely affect them. While the first dispute is linked with the observance of antidumping rules, which are not the main scope of the negotiations, the second one is a paradigmatic case involving law, trade and environment. As far as the Aircraft case is concerned, an Agreement has just been signed with the OECD on July 30, 2007 by the main aircraft manufacturers setting forth new rules for the sector. In OECD Secretary-General Angel Gurría’s view, such regulation settles several issues that motivated various disputes in the WTO.

Therefore, one can conclude that the current deadlock in the Doha negotiations, although not expected to set an explosion in the use of the WTO system, is likely to cause an increase in litigation amongst its members, especially concerning those subjects that are the main purpose of the Round. Besides, the frustration in achieving short-term success in the talks may stimulate the members to present complaints that, during the previous months, were being kept in store so as to create a favorable environment for fortuitous consensus.

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