A. SUMMARY OF PROVISIONS
The Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU or Understanding) builds on and improves upon the dispute
settlement procedures currently in place under the GATT. In general, the
rules and procedures set out in the DSU will govern disputes arising under
each of the various Uruguay Round agreements.
The new Understanding responds to long-held U.S. concerns regarding
international trade disputes. As the country that has used the GATT dispute
settlement mechanism more often than any other country, the United States has
a strong interest in having an effective process to enforce U.S. rights under
the Uruguay Round Agreements. Under the prior system, U.S. efforts to enforce
its rights were often frustrated when other GATT parties delayed the dispute
settlement process and blocked adoption of GATT panel reports. To address
this problem, Congress made the negotiation of a more effective GATT dispute
settlement system a principal U.S. negotiating objective in the Uruguay Round.
Among the most important changes effected by the DSU are
imposition of stringent time limits for each stage of the dispute
settlement process, including the time for implementation of panel
creation of an Appellate Body to review panel interpretations of
Uruguay Round agreements and legal issues;
automatic adoption of panel or Appellate Body reports and of
requests for retaliation in the absence of a consensus to reject
the report or request; and
automatic authority for complaining parties to retaliate,
including in sectors outside the subject of the dispute, on
request if panel recommendations are not implemented or there is
no mutually satisfactory solution to the matter.
It is important to note that the new WTO dispute settlement system does
not give panels any power to order the United States or other countries to
change their laws. If a panel finds that a country has not lived up to its
commitments, all a panel may do is recommend that the country begin observing
its obligations. It is then up to the disputing countries to decide how they
will settle their differences.
The defending country may choose to make a change in its law. Or it may
decide instead to offer trade "compensation" -- such as lower tariffs. The
countries concerned could agree on compensation or on some other mutually
satisfactory solution. Alternatively, the defending country may decide to do
nothing. In that case, the country that lodged the complaint may retaliate by
suspending trade concessions equivalent to the trade benefits it has lost.
2. Scope of Application
The DSU creates a framework for dispute settlement procedures applicable
to each Uruguay Round Agreement, including the WTO Agreement and the DSU
itself. However, the precise manner in which the Understanding will apply to
the four "plurilateral" agreements (listed in Annex 4 of the WTO Agreement),
such as the Agreement on Government Procurement and the Agreement on Civil
Aircraft, will be decided by the parties to those agreements.
Furthermore, paragraph two of Article 1 notes that certain of the
"multilateral" trade agreements (listed in Annexes 1 through 3 of the WTO
Agreement) contain special or additional rules that supersede those of the DSU
for matters arising under those agreements. If dispute settlement
proceedings involve two or more Uruguay Round Agreements with conflicting
special rules and the parties cannot agree on which rules will apply, the
chairman of the Dispute Settlement Body (DSB) will decide the issue.
3. Dispute Settlement Body
Article 2 establishes the DSB, which will oversee the application of the
Understanding. Although all WTO members will be represented on the DSB, only
those governments that are members of a particular "plurilateral" agreement
may participate in DSB decisions concerning that agreement.
The DSB is empowered to:
adopt panel and Appellate Body reports;
oversee the implementation of panel recommendations adopted by
the DSB; and
The DSB must reach all decisions by "consensus," meaning that no member
formally objects to the proposal under consideration. For example, the DSB
may reject a panel report only if no member objects to the proposal to reject
4. General Principles
The first seven paragraphs of Article 3 spell out the general principles
underlying the dispute settlement system. Many of these principles are drawn
from those agreed at the Uruguay Round ministerial conference held in Montreal
in 1989 (the Montreal rules).
Paragraph two emphasizes that while the dispute settlement system is
meant to clarify the various Uruguay Round Agreements, the DSB cannot add to
or diminish the rights and obligations provided in those Uruguay Round
Agreements. Moreover, paragraph nine provides that the Understanding does not
prejudice a government's right to seek an authoritative interpretation of any
Uruguay Round Agreement from the Ministerial Conference or General Council of
Article 3 also recognizes the importance of maintaining the balance of
rights and obligations between WTO members countries. To this end, members
that agree to settle a dispute that has been subject to consultations under
the DSU rules must inform the DSB of the agreement so that other members can
raise any concerns they may have regarding the settlement.
Paragraph seven notes that the preferred resolution of any dispute is
one mutually acceptable to the disputing parties. In the absence of an agreed
solution, the Understanding provides that the withdrawal of any measure found
to be inconsistent with the relevant agreement is "usually" the first
objective. The provision of trade compensation is a less favored alternative
and should be a temporary measure. The Understanding views the suspension of
trade concessions or other obligations -- that is, retaliation -- as a last
Paragraph eight restates the long-agreed rule that the showing of
adverse trade effects ("nullification or impairment of benefits") required
under GATT Article XXIII for one government to complain about another's
conduct will be presumed in cases where the defending government has infringed
its obligations under the relevant Uruguay Round Agreement. The defending
government may rebut the presumption, however, and prove that the measure has
not had an adverse effect on other members.
Paragraph eleven is a transition rule. It provides that current GATT
dispute settlement procedures will apply to any dispute in which a request for
consultations under the GATT is made before the WTO goes into effect.
Moreover, those rules will apply to any panel report that has not been adopted
or fully implemented by that date. This means, for example, that a single
government could continue to "block" the adoption of such reports.
Finally, paragraph twelve provides that where the complaining party is a
developing country it may request the application of certain, more expeditious
procedures adopted by the GATT Contracting Parties in 1966. A panel operating
under these special procedures may, with the consent of the developing
country, extend the time frame for a decision if the panel believes that it
has insufficient time to provide its report.
5. Consultations and Voluntary Dispute Resolution Procedures
DSU consultation procedures, including time limits and notification
requirements, are based in large part on the Montreal rules and prior
practice. A complaining government must seek consultations with the
government whose measure is in dispute before requesting the DSB to form a
panel to hear the matter. Article 3 generally requires a member to wait 60
days after it makes a request for consultations before requesting
establishment of a panel. Special shorter timetables are provided for
disputes concerning perishable goods. Other members may join in consultations
if the member to which the request for consultations was addressed agrees that
the requesting member has a substantial interest in the dispute. If not, that
member may request separate consultations.
The provisions of Article 5, regarding "good offices," conciliation, and
mediation are also based on existing GATT practice. Recourse to such
procedures is by mutual consent of the parties and either party may terminate
them at any time.
6. Panel Procedures
a. Convening a Panel
Article 6 provides that a request for the establishment of a panel
must be presented to the DSB in writing and provide specified information on
the dispute. If the member requesting a panel seeks special terms of
reference for the panel, the proposed text must be included.
A dispute settlement panel will be established no later than at
the second DSB meeting at which the request for a panel is placed on the
agenda unless there is a consensus to reject the request. If the complaining
party requests, the DSB must convene within 15 days after that member presents
its request for a panel, although the DSB must provide at least 10 day's
advance notice of the meeting.
b. Terms of Reference
Article 7 spells out the standard "terms of reference" that panels
will use to conduct their work in the absence of other terms agreed by the
disputing parties. The standard terms of reference are based on those
currently in use under the GATT. The Article also provides that panels must
address the relevant provisions of any agreement cited by the parties to the
c. Panel Composition
The rules set out in Article 8 regarding panel composition are
also based largely on current GATT practice. One new element is the guidance
provided by that article regarding who should be selected as a panelist.
Article 8 makes it clear that panelists may be drawn from either the public or
private sector and must be "well-qualified," such as persons who have served
on or presented a case to a panel, represented a government in the WTO or the
GATT, served with the Secretariat, taught or published in the international
trade field, or served as a senior trade policy official.
The Secretariat will maintain its current list of individuals
possessing these qualifications and governments may periodically add to that
list. Panelists need not be drawn from the list.
Panels normally will consist of three persons and those persons
may not be citizens of any of the parties to the dispute unless those
governments agree. If the parties do not agree on the panelists within 20
days after the establishment of the panel, the WTO's Director-General (in
consultation with the parties to the dispute, the chairman of the DSB, and the
chairman of the relevant committee or council) will select the panelists.
d. Multiple Complaints and Third Parties
DSU procedures for dealing with multiple complainants are set out
in Article 9. Article 9 reflects a strong preference for convening a single
panel to hear complaints by several countries concerning the same measure.
When that is not possible, the DSB will ensure as much uniformity as possible
in panelists, timetables, and procedures.
Article 10 governs third-party rights in panel proceedings. To
qualify as a third-party participant, a government must have a substantial
interest in the matter before the panel and must notify the DSB of this
interest. Once qualified as a third party, a government has the right to make
written and oral submissions to the panel and the panel must reflect those
submissions in its report. Third parties must also be provided copies of the
first written submissions filed by the parties to the dispute. To encourage
uniformity of decision making, a dispute will be referred to the same panel,
wherever possible, if a government seeks redress of a dispute in which it
previously participated as a third party.
e. Panel Functions and Procedures
Article 11 provides that the general function of a panel is to
assist the DSB in discharging its functions. That requires a panel to make an
objective assessment of the matter before it, including the relevant facts,
the applicability of the Uruguay Round agreements, and the measure's
conformity with those agreements.
The United States has expressed the view in the GATT, and will
maintain the view in the WTO, that in making its assessment of the case a
panel should refrain from opining on complex, unsettled issues of domestic
law. Panels that base their reports on opinions purporting to resolve such
issues risk raising questions about the immediate and continued validity of
their reports and may undermine confidence in the dispute settlement process.
Article 12 contains detailed guidance on procedures that panels
are to follow. Although panelists fix the timetable for the panel proceedings
in each case, panelists are instructed normally to follow the Working
Procedures set out in Appendix 3 of the DSU. These include strict time limits
for submissions to the panel and provisions for scheduling panel meetings.
Paragraph seven of that Article requires panels to submit written
reports. If a matter is settled, the report will consist of a description of
the case and a statement that the parties have reached a solution. If there
is no settlement, the panel's report is to include findings of fact, a
statement regarding how the pertinent Uruguay Round Agreements apply to the
disputed measure, and the reasons for any findings and recommendations that
the panel makes.
Paragraph eight provides that, in general, the time between
establishment of the panel and issuance of its final report may not exceed six
months. In disputes concerning perishable goods or other urgent matters,
panels must try to issue their reports within three months. If the panel
cannot meet these deadlines, it must inform the DSB and provide an estimate of
when it will submit the final report. The maximum period for panel
proceedings is nine months.
Paragraph ten encourages flexibility in the application of DSU
timetables for consultations and panel proceedings involving complaints
against developing countries. In addition, paragraph eleven provides that in
such cases the panel's report must indicate how any special treatment for such
countries called for in a relevant agreement has been taken into account.
Finally, paragraph twelve provides that a panel may suspend its
proceedings for up to 12 months on the request of a complaining party. If the
panel proceedings are not restarted within 12 months, the authority for the
panel lapses. In such a case, the complaining party would be required to
request the establishment of a new panel to pursue the matter.
Article 13 authorizes a panel to solicit information and technical
advice from any person or entity located in a member's territory, after
informing that member of the request. WTO governments are required to respond
promptly and fully to any panel request for information. Panels are
prohibited from revealing any confidential information provided to them
without a formal authorization from the provider.
Article 13 also makes clear that a panel may seek advice from
relevant experts and may establish an "expert review group" to provide an
advisory report on any scientific or factual issue arising in the dispute.
Rules for the establishment of such a group, and the procedures for its
operation, are set out in Appendix 4 to the DSU.
Article 14 reflects the long-standing GATT practice that panel
deliberations are to be confidential and that individual opinions expressed in
panel reports must be kept anonymous. Once a report is adopted it will be
released to the public.
Article 15 creates a new procedure based in part on a provision of
the United States - Canada Free-Trade Agreement. It provides that the panel
must furnish the parties with a complete draft of the panel's report --
including the panel's findings and conclusions -- before it is made final.
The parties may provide written comments on the draft and the panel must hold
a meeting at any party's request to consider those comments. Adoption of this
new procedure should help improve the quality of panel reports by permitting
the parties to point out, and the panel to correct, errors in its proposed
findings or conclusions.
7. Adoption of Panel Reports
DSU rules regarding the adoption of panel reports represent a
substantial improvement over those currently in place under the GATT. Article
16 provides that the DSB must adopt all panel reports within 60 days after
they are issued unless one of the parties to the dispute notifies the DSB that
it will appeal the decision or the DSB decides by consensus to reject the
report. This means that a single country or group of countries will no longer
be able to "block" the adoption of panel reports. If a panel report is
appealed, the DSB will consider the report for adoption after the appeal
process is completed.
Article 17 creates another new procedure, appellate review of panel
decisions, which should help ensure uniform interpretation of Uruguay Round
Agreements. Three-person appellate panels, drawn from an "Appellate Body" of
seven independent experts, will review the legal issues presented in any
panel report appealed by one of the disputing parties. The Appellate Body
will have the authority to uphold, modify, or reverse the legal findings and
conclusions of the panel.
Although only parties to a dispute may appeal a panel report, third parties may make written submissions to the Appellate Body and may be given an opportunity to be heard. Normally, the Appellate Body will render its findings within 60 days after a disputing party files an appeal, although the Appellate Body may take up to 30 more days where necessary.
The DSB is required to adopt an Appellate Body report within 30 days after it
is issued unless there is a consensus not to do so.
9. Communications with Panels and the Appellate Body
Article 18 prohibits ex parte communications with a panel or the
Appellate Body. The Article also requires a panel or the Appellate Body to
treat as confidential all written submissions it receives. In addition, each
party participating in a dispute must keep confidential all submissions by
other parties that it receives during the course of a dispute. A party may
disclose its own positions to the public, however, and may request the other
parties to provide non-confidential summaries of their written submissions for
10. Panel and Appellate Body Recommendations
When it finds that a government's measure is inconsistent with a Uruguay
Round Agreement, a panel or the Appellate Body must issue a recommendation to
that government to bring the offending measure into conformity with the
agreement. While the panel or Appellate Body may also suggest ways to
implement such a recommendation, Article 19 makes it clear that any such
suggestion is non-binding. Any decision on whether or how to implement such a
recommendation is entirely a matter for the country concerned.
11. Implementation of Recommendations
a. Timetables for Adoption and Implementation
Generally, if a dispute is not considered by the Appellate Body,
Article 20 provides that the period from the establishment of the panel to the
date the DSB considers adoption of the panel's report must not exceed nine
months. If the Appellate Body reviews the panel report, the period will
normally not exceed 12 months. The parties to the dispute may agree to extend
these time periods, however.
One of the deficiencies in the current GATT dispute settlement
procedures is the absence of any concrete deadline for the defending country
to eliminate or amend a measure that a panel has found to be inconsistent with
the GATT. Although GATT Article XXIII:2 provides that such changes are to be
carried out within a "reasonable period," this phrase had never been precisely
DSU Article 21 establishes three alternative methods for fixing
this period. First, the DSB may approve a time period proposed by the
government in question. Alternatively, the parties to the dispute may agree
on an implementation period within 45 days after the DSU adopts the panel
report. If the implementation period cannot be set by either of the preceding
methods, it will be determined through binding arbitration that is to be
completed within 90 days after the panel report is adopted. Article 21
suggests that the implementation period normally should not be longer than 15
The time that may elapse from the date a panel is established
until the date the implementation period is set may not exceed 15 months
unless the period is extended by the parties, the panel, or the Appellate
Body. No extension may increase the time to more than 18 months unless the
parties to the dispute agree that there are exceptional circumstances.
Current GATT procedures do not provide a method for resolving
disagreements over implementation of the report's recommendations. Paragraph
5 of Article 21 addresses this problem by providing that such disputes will be
decided under DSU procedures. Wherever possible, the panel convened to
consider the disagreement will be the one that reviewed the original
complaint. Panels normally must issue decisions in these cases within 90 days
The DSB will periodically review the progress that member
governments have made in implementing panel decisions. To this end, Article
21 requires governments to make periodic written submissions to the DSB
detailing their efforts to put panel reports into effect.
12. Compensation and Retaliation
If a government fails to implement a panel or Appellate Body
recommendation to bring a measure into conformity with a Uruguay Round
Agreement, the government must enter into negotiations, on request, with the
complaining party or parties to reach agreement on mutually acceptable
compensation. The negotiations must begin no later than the end of the
implementation period provided for under Article 21.
Article 22 makes clear that compensation is intended to be
temporary and that full implementation of a panel or Appellate Body
recommendation is the preferred result. While a government may offer
compensation for failure to implement a recommendation, compensation is not
required and, if granted, must be consistent with all Uruguay Round
If agreement on compensation is not reached within 20 days after
the expiration of the period allotted for implementing the panel or Appellate
Body decision, a complaining party may request the DSB to authorize it to
suspend concessions (retaliate). Paragraph three establishes certain
procedures for the complaining government to observe in considering what
concessions to suspend:
As a general principle, the complaining country must first
consider taking action in the general sector (such as goods,
major services sectors, or particular types of intellectual
property) affected by the measure in question.
However, if it believes that such retaliation would not be
"practicable or effective," the complaining government may
consider retaliation directed at another sector. In such a
case, the member must consider taking action through
suspending concessions it has granted under a Uruguay Round
Agreement in the same general subject area as the agreement
that was the subject of the dispute (e.g., if the dispute
involved an agreement related to trade in goods -- that is,
an agreement included in Annex 1A of the WTO Agreement --
the member must consider retaliation through the suspension
of benefits under another Annex 1A agreement).
If the complaining party considers that even this type of
retaliation would be impracticable or ineffective, and if it
further believes that circumstances are serious enough, it
may consider suspending concessions under an unrelated
Uruguay Round Agreement. For example, it may consider
increasing tariffs on goods in response to a violation of
the intellectual property agreement.
Paragraph 3 sets out detailed definitions of what constitute
"sectors" and related "agreements" for this purpose.
In assessing what type of retaliation to select, the complaining government is directed to consider trade in the relevant sector or agreement as well as broader economic considerations. It is the complaining government itself, however, not the DSB or a panel, that makes the judgment whether a particular form of retaliation is "practicable or effective."
The DSB must grant a complaining country's request to suspend
benefits within 30 days after the "reasonable period" allotted for
implementation of the panel or Appellate Body report has elapsed. However,
paragraph 4 limits the retaliation a complaining government can impose to that
equivalent to the benefits the defending country is impairing by its WTO-inconsistent actions. This standard is equivalent to that in section
301(a)(3) of the Trade Act of 1974 (19 U.S.C. 2411 (a)(3)), which permits the
Trade Representative to apply retaliation equivalent in value to the burden or
restriction being imposed on U.S. commerce.
The government facing retaliation may request arbitration if it
considers that the retaliation is not equivalent to the actual loss of
benefits. In such an arbitration, the panel is not permitted to examine the
nature of the concessions to be suspended -- for example, which tariffs are to
be increased. Rather, the panel must confine its inquiry to whether the
levels of the proposed retaliation and the loss of benefits are equivalent.
Second, the government requesting the arbitration may ask the
arbitration panel to rule that the government proposing retaliation did not
adhere to DSU procedures, described above.
Retaliation must be deferred during the arbitration, which is to
be completed no later than 60 days after the period for implementation of the
panel report has elapsed. The arbitration will be held before the original
panel, if the panelists are available, or before arbitrators appointed by the
The arbitration panel's decision is final and second arbitrations
are not permitted. Following the arbitration, the DSB will grant a request to
retaliate where it is consistent with the panel's decision.
Paragraph eight emphasizes that retaliation is to remain in place
only until there is a satisfactory resolution of the dispute. Such a
resolution may be achieved through removal of the offending measure,
elimination of the nullification or impairment, or through reaching a mutually
satisfactory solution with the other party to the dispute. The DSB will
monitor any retaliation applied pursuant to the Understanding.
c. Application to Local and Regional Measures
Paragraph nine confirms that dispute settlement provisions may be
invoked with respect to measures taken by regional or local governments. In
particular, DSU provisions relating to compensation and retaliation apply in
cases involving such measures.
13. Recourse to DSU Procedures
Article 23 provides that WTO members must use DSU procedures when they
seek to remedy a violation of a Uruguay Round Agreement. Furthermore, no
member may issue a "determination" that another government has violated a
Uruguay Round Agreement unless a panel or Appellate Body has first reached
Article 23 is consistent with law and practice under section 301 of the
Trade Act of 1974. When the Trade Representative initiates a section 301
investigation in a case that involves a trade agreement, the Trade
Representative is required by section 303(a)(2) to initiate the formal dispute
settlement procedures provided under that trade agreement. Moreover, under
section 301, the Trade Representative makes a determination whether U.S.
rights have been violated under a trade agreement only following U.S.
participation in those proceedings. Finally, neither Article 23 nor section
301 requires the United States to use DSU procedures when the Trade
Representative considers that an investigation does not involve a Uruguay
14. Provisions for Least Developed Countries
Article 24 requires WTO governments to give special consideration to
least developed country members in deciding whether to invoke and pursue
dispute settlement procedures. Those members may request the WTO Director-General or Chairman of the DSB to provide good offices, conciliation, or
mediation to help resolve disputes.
Article 25 offers arbitration as an alternative means of dispute
settlement. The procedures are the same as those applied under the Montreal
Rules with the addition that DSU rules on determining the deadlines for
implementation of panel reports, for the provision of compensation, and for
retaliation will apply to arbitration proceedings.
16. "Non-Violation" Cases
Article 26 provides special rules for cases where a WTO member seeks
redress of another government's action that, while not inconsistent with any
Uruguay Round Agreement, nevertheless results in benefits that should have
accrued to it being "nullified or impaired" (so-called "non-violation"
disputes.) In initiating such a case, the complaining government must provide
a detailed justification of its grievance.
Furthermore, the remedy in a "non-violation" case differs from that of
the usual "violation" case. Although there is no obligation for the defending
government to withdraw the measure in question, that government must make a
"mutually satisfactory adjustment," and compensation may be part of any final
In addition, any party to such a dispute may invoke the arbitration procedure provided in Article 21 (normally reserved for fixing the "reasonable period" for implementation of panel reports) for determining the level of benefits that have been nullified or impaired. The arbitration panel may also issue non-binding suggestions on how to settle the matter.
17. Secretariat Functions
Article 27 provides that the WTO Secretariat will provide technical and
secretarial support in connection with dispute settlement procedures and may
provide legal and technical advice to developing country members.
Appendix 1 of the DSU lists the agreements covered by the Understanding.
Appendix 2 sets out the special or additional dispute settlement rules
contained in certain Uruguay Round Agreements. By virtue of Article 1:2,
these rules supersede those of the DSU for matters arising under those
Appendix 3 spells out working procedures for panels, including a
proposed timetable for panel work.
Appendix 4 provides rules governing the establishment and operation of
any "expert review groups" convened under Article 13.
B. ACTION REQUIRED OR APPROPRIATE TO IMPLEMENT THE AGREEMENT
1. Implementing Bill
a. WTO Dispute Settlement Panels and Procedures
In order to ensure that the United States enjoyed the full
benefits it bargained for in the Uruguay Round, U.S. negotiators insisted on
the inclusion of a fair and effective WTO dispute settlement system. Section
123 of the implementing bill is designed to help enhance the level of fairness
and transparency already built into the system, and to ensure public
confidence in WTO dispute settlement.
(1) Selection and Report on the Roster of Panelists
One key to maintaining such confidence is the appointment of
dispute settlement panelists of the highest quality. The WTO Secretariat will
maintain an indicative roster of potential panelists. The DSU provides that
this roster is to include well-qualified governmental and non-governmental
individuals, with emphasis on trade policy experience. Subsections (a) and
(b) of section 123 call for continuing attention to this roster at the highest
level of the Executive Branch, in order to assure that persons appointed to
the roster are well-qualified.
(2) Rules on Conflicts of Interest
A second key to maintaining confidence in the panel process
is assurance that there will be protection against conflicts of interest on
the part of all those involved in determining the outcome of disputes.
Subsection 123(c) calls for the Trade Representative to seek establishment of
conflict-of-interest rules for panelists and Appellate Body members and to
report to the Congress annually on any progress made in establishing such
(3) Consultations on Dispute Settlement Proceedings
Subsections 123(d) through (f) ensure that there will be an
effective coordinated response by the U.S. government in the event that
another WTO member country challenges a federal or state law under the WTO
dispute settlement process. In such a case, the Trade Representative will
promptly notify the relevant Congressional committees of jurisdiction at each
critical stage throughout the course of the proceedings. The Trade
Representative will consult with those committees concerning the panel report
and regarding any decision to appeal it. In the event of an adverse panel or
Appellate Body report, the Trade Representative will consult with the
appropriate Congressional committees concerning how best to respond.
(4) Regulatory Changes Following Panel Reports
Subsection 123(g) ensures that the Administration will
consult with relevant Congressional committees, and consider public and
private sector views, concerning any change in regulation, or in
administrative practice consisting of written policy guidance of general
application, that the Administration may propose in response to a WTO panel or
Appellate Body report that finds the regulation or practice to be inconsistent
with a Uruguay Round agreement. Among the provisions in subsection 123(g) is
a 60-day consultation period and a procedure for the Ways and Means and
Finance Committees to express their views through a non-binding resolution on
the Administration's proposal. The subsection does not apply to
administrative changes contemplated by the ITC.
A final rule may not go into effect before the end of the
60-day consultation period unless the President determines that an earlier
date is in the national interest. One basis for such a determination would be
a clear consensus in the Congress and the private sector on the proposed
(5) Consultations on WTO Dispute Settlement Rules and
Within four years of entry into force of the WTO Agreement,
the Ministerial Conference will complete a full review of dispute settlement
rules and procedures, and will take a decision at its first meeting thereafter
on whether to continue, modify or terminate these procedures. The Trade
Representative will take into account advice from the Ways and Means and
Finance Committees in formulating the U.S. position for this review, through
the consultations required by subsection 123(h).
b. Access to WTO Dispute Settlement
Subsections 127(a) and (b) of the bill establish procedures for
ensuring that Congress, the public, and the private sector are kept informed
of any dispute settlement proceedings under the WTO in which the United States
is a party, and that their views are solicited and taken into account in the
formulation of U.S. positions in such proceedings. These provisions
supplement other requirements in U.S. law concerning notification and
consultations in respect of trade agreement dispute settlement proceedings in
which the United States is a party.
Under subsection 127(a), the Trade Representative will consult
with all Congressional committees of jurisdiction, the relevant advisory
committees established under section 135 of the Trade Act of 1974, and the
petitioner, if any, under section 302 of the Trade Act of 1974, at each stage
of any panel or Appellate Body proceeding in which the United States is a
party. In addition, the Trade Representative will consider the views of
appropriate interested private sector and nongovernmental organizations
concerning the matter.
Promptly after the establishment of the panel, the Trade
Representative will publish a notice in the Federal Register providing the
public with important basic information on the dispute and seeking written
comments on the matter. The Trade Representative will take those comments,
and any advice provided by the Congressional and advisory committees and any
section 302 petitioner, into account in developing U.S. submissions to the
panel or Appellate Body. Although the Trade Representative is responsible for
representing the United States in those proceedings, Congress, the public, and
others can provide useful information, expertise, and perspective.
Subsection 127(c) requires the Trade Representative to make U.S.
written submissions available to the public promptly after they are submitted
to the panel or Appellate Body. This subsection also authorizes the Trade
Representative to withhold from disclosure any information that its provider
identifies as proprietary or which is treated as confidential by a foreign
government. The Trade Representative will also make each panel and Appellate
Body report in a proceeding to which the United States is a party available
promptly after it is circulated to WTO members.
Subsection 127(c) also requires the Trade Representative to
request other WTO member countries in a dispute with the United States to
permit the release of their written submissions to the public. If the other
country in a DSU panel or Appellate Body proceeding fails to make its
submissions available to the public, the Trade Representative will request
that country to provide non-confidential summaries of its written submissions,
pursuant to subsection 127(d). That subsection requires the Trade
Representative to request non-confidential summaries of submissions to all WTO
dispute settlement panels, even if the United States is not a party to the
dispute. The Trade Representative will make those summaries available to the
public promptly after they are received.
Subsection 127(e) requires the Trade Representative to maintain a
file accessible to the public on disputes to which the United States is a
party. This file will provide a centralized location providing public access
to information on such disputes.
c. Response to Panel Reports under Safeguards, Antidumping, and
Section 129 of the implementing bill establishes a procedure by
which the Administration may obtain advice it requires to determine its
response to an adverse WTO panel or Appellate Body report concerning U.S.
obligations under the Agreement on Safeguards, Antidumping, or Subsidies and
Countervailing Measures. Section 129 also establishes a mechanism that
permits the agencies concerned (the Department of Commerce (Commerce) and the
U.S. International Trade Commission (ITC)) to issue a second determination,
where such action is appropriate, to respond to the recommendations in a WTO
panel or Appellate Body report.
Although the procedures differ somewhat for each agency, section
129 requires the Trade Representative to obtain the views of Commerce and the
ITC before deciding on an appropriate response to an adverse report. In
addition, section 129 provides for frequent consultations between the Trade
Representative and the Ways and Means and the Finance Committees (the
Committees). After considering the views of the Committees and the agencies,
the Trade Representative may require the agencies to make a new determination
that is "not inconsistent" with the panel or Appellate Body recommendations
and to implement this second determination.
Under the authority provided by section 129, the Trade
Representative may request the ITC or Commerce to take action "not
inconsistent" with a panel report only if such action is in accord with U.S.
safeguards, antidumping, or countervailing duty law, as the case may be. In
the event that U.S. law precludes such action, the Administration would need
to request the Congress to enact legislation to address the conflict between
U.S. law and the Uruguay Round agreement in question.
(1) Actions By the ITC
Subsection (a)(1) provides authority for the Trade
Representative, following issuance of an interim report from a panel or report
from the Appellate Body that has found an action of the ITC to be inconsistent
with U.S. obligations under the relevant agreement, to request advice as to
whether U.S. law provides the ITC with discretion to render its action in the
particular matter "not inconsistent with" an adverse report. At the time the
Trade Representative requests an advisory opinion, the Committees will be
notified, either in writing or orally, of the request.
The purpose of the Trade Representative's request will be to
determine whether the ITC can take action "not inconsistent with" the panel's
recommendation under existing U.S. law. Accordingly, the ITC will examine
the full range of its discretion under U.S. law and based on that examination
will advise the Trade Representative whether the law is reasonably susceptible
of an interpretation that would allow the agency to take action "not
inconsistent with" the report's recommendations. Because the ITC's report
under this subsection is solely advisory, it is not made subject to appellate
Subsection (a)(2) ensures that the Trade Representative will
receive such advice in time for the Trade Representative to decide whether to
appeal a panel's interim report, or whether to implement an adverse report,
and to estimate how long an implementation period may be required. Under
Article 16.4 of the DSU, a panel report comes before the DSB for adoption
within 60 days of its issuance, unless a party to the dispute notifies the DSB
that it has decided to appeal the panel's report. Under Article 21.3 of the
DSU, within 30 days after the adoption of a panel or Appellate Body report a
member must advise the DSB of its intentions concerning implementation of the
report's recommendations, including proposing a reasonable time for
implementation. To ensure that the Trade Representative receives the ITC's
report in sufficient time, subsection (a)(2) provides that the ITC must
provide its advisory opinion concerning an interim panel report within 30
calendar days of the Trade Representative's request and within 21 calendar
days of the request in the case of an Appellate Body report.
Section 129 does not require the Administration to request
the ITC to make a second determination, even if a majority of the ITC advises
that the ITC can take action consistent with existing law. Subsection (a)(3)
provides for the Trade Representative to consult with the Committees
concerning the appropriate response to the report.
Subsection (a)(4) provides the mechanism by which, if a
majority of the ITC has advised that it may take action consistent with U.S.
law to render its actions not inconsistent with an adverse report, the Trade
Representative may require the ITC to take such action. Many of the ITC's
proceedings are time-limited by statute, and the ITC cannot revisit its
actions in those proceedings in the absence of the authority provided by
subsection (a)(4) or a remand. A written request by the Trade Representative
under subsection (a)(4) will provide authority for the ITC to take action with
respect to such matters. A Commissioner who was not part of the majority
issuing an affirmative report under subsection (a)(4) and who considers that
Title VII of the Tariff Act of 1930 or section 201 of the Trade Act of 1974,
as the case may be, does not permit action "not inconsistent with" the
findings of the WTO panel or Appellate Body report would be expected not to
participate in the determination required under (a)(4). Any such Commissioner
could, however, append views on the matter to the ITC determination.
Under subsection (a)(4), the Trade Representative will not
refer a matter to the ITC unless a majority of Commissioners provided
affirmative advise in response to a request under subsection (a)(1). Although
subsection (a)(4) requires it to make a determination following the receipt of
a request, the ITC will decide independently on the steps it will take to
render its actions "not inconsistent with" the panel or Appellate Body
findings. To permit the Trade Representative to propose to the DSB a
reasonable period for implementation, subsection (a)(4) sets a 120-day time
limitation for the ITC to take such action. This 120-day limit will provide
the ITC sufficient time to gather additional information if necessary for it
to decide on appropriate implementing action.
Subsection (a)(5) provides for the Trade Representative to consult with the Committees on the ITC's determination under subsection (a)(4) prior to the implementation of the
Subsection (a)(6) provides authority for Commerce to revoke
an order under Title VII in whole or in part to implement an ITC determination
under subsection (a)(4).
Subsection (a)(7) provides the President authority to
reduce, modify, or terminate action under section 203 of the Trade Act of 1974
after receiving the ITC determination under subsection (a)(4) and consulting
with the Committees.
(2) Actions by Commerce
Under subsection 129(b), following the issuance of an
adverse WTO panel or Appellate Body report concerning a Commerce antidumping
or countervailing duty determination and consultations with Commerce and the
Committees, the Trade Representative may direct Commerce to make a
determination that is "not inconsistent with" the WTO report's recommendations, and may direct Commerce to implement this determination.
Subsections (b)(1) and (b)(3) require the Trade Representative to consult with Commerce both promptly after a panel report is issued and
again prior to directing Commerce to take any action to implement the second
determination. The requirement for the Trade Representative to consult with
Commerce is intended to ensure that the Trade Representative benefits from
Commerce's administrative and substantive expertise in the evaluation of a
panel's findings and the development of implementing action, if any. The
Administration expects that Commerce would provide the Trade Representative
advice on: (1) whether implementation of the findings is permissible under the
antidumping or countervailing duty law; (2) the implications for the
administration of the antidumping and countervailing duty laws of implementing
the findings; and (3) the most desirable method of implementing the findings
and the time required to do so.
Implementation of an adverse WTO report under subsection
129(b) is a two-step process. First, the Trade Representative would direct
Commerce to make a new determination. Second, the Trade Representative may
direct Commerce to implement that determination. If the Trade Representative
directs Commerce to implement the second determination, Commerce may do so
even if litigation is pending with respect to the initial agency
The Trade Representative may decline to request implementation of the second determination. This might be the case, for example, if
Commerce issued a final affirmative subsidy determination and a WTO panel
subsequently finds that Commerce's analysis was not consistent with the
Subsidies Agreement. On making a new determination at the Trade
Representative's direction, Commerce could correct the analytical flaw found
by the panel without changing the original outcome. In such a case, there
would be no need to implement the new determination as a matter of domestic
Furthermore, while subsection 129(b) creates a mechanism for
making new determinations in response to a WTO report, new determinations may
not be necessary in all situations. In many instances, such as those in which
a WTO report merely implicates the size of a dumping margin or countervailable
subsidy rate (as opposed to whether a determination is affirmative or
negative), it may be possible to implement the WTO report recommendations in a
future administrative review under section 751 of the Tariff Act. In such
instances, however, the requirements of subsection (b)(1) regarding consultations with Commerce and the Committees would still apply.
(3) Effect of Determinations
Consistent with the principle that GATT panel recommendations apply only prospectively, subsection 129(c)(1) provides that where determinations by the ITC or Commerce are implemented under subsections (a) or (b), such determinations have prospective effect only. That is, they apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date on which the Trade Representative directs implementation. Thus, relief available under subsection 129(c)(1) is distinguishable from relief available in an action brought before a court or a NAFTA binational panel, where, depending on the circumstances of the case, retroactive relief may be available. Under 129(c)(1), if implementation of a WTO report should result in the revocation of an antidumping or countervailing duty order, entries made prior to the date of Trade Representative's direction would remain subject to potential duty liability.
To ensure that private parties are aware of the effective
date of an implemented determination, subsection (c)(2) requires Commerce or
the Trade Representative to publish notice in the Federal Register of the
implementation of determinations under section 129.
(4) Opportunity for Comments
Under subsection 129(d), prior to issuing a second
determination, Commerce or the ITC, as the case may be, will provide
interested parties with an opportunity to submit written comments. At their
discretion, the agencies also may hold a hearing on the matter.
(5) Judicial Review
Subsection 129(e) amends section 516A of the Tariff Act of
1930 to provide for review by the courts and NAFTA binational panels of new
Title VII determinations made by Commerce or the ITC under section 129 that
are implemented. The subsection also establishes the time available for
filing an appeal with the court or with a binational panel. Section 129
determinations that are not implemented will not be subject to judicial or
binational panel review, because such determinations will not have any effect
under domestic law.
In some cases, implementation of section 129 determinations
may render moot all or some issues in pending litigation in connection with
the agency's initial determination. For example, should the Trade
Representative direct Commerce to implement a section 129 determination that
changes the cash deposit rate, such action could render moot any pending
domestic litigation solely involving the amount of the cash deposit rate, as
opposed to the validity of the underlying antidumping or countervailing duty
order. If, by contrast, the litigation also involved the validity of the
original determination, the court or binational panel would still have to
render an opinion on that subject.
Since implemented determinations under section 129 may be
appealed, it is possible that Commerce or the ITC may be in the position of
simultaneously defending determinations in which the agency reached different
conclusions. In such situations, the Administration expects that courts and
binational panels will be sensitive to the fact that under the applicable
standard of review, as set forth in statute and case law, multiple permissible
interpretations of the law and the facts may be legally permissible in any
particular case, and the issuance of a different determination under section
129 does not signify that the initial determination was unlawful.
d. Amendments to Section 301 and Trade Agreements Act
Section 314 of the bill amends various provisions of section 301
of the Trade Act of 1974 dealing with the conduct of section 301
investigations and the authority of the Trade Representative to respond to
unfair trade practices by foreign governments.
(1) Authority under Section 301
Section 314(a)(1) clarifies that the Trade Representative's
authority, subject to the direction of the President, encompasses any power of
the President, with respect to trade in goods and services or to relations
with the foreign country in question. This clarification reflects the
Administration's intent to expand the focus of possible action under section
301 to areas that are not within the scope of U.S. obligations under the
Uruguay Round Agreements.
Section 314(a)(2) amends section 301 to eliminate the
requirement to give priority to imposition of duties in all instances.
Pursuant to the amendment, such priority is to be accorded only if the Trade
Representative determines that action under section 301 is to be in the form
of import restrictions.
Subsection (b) grants the Trade Representative authority
under section 301 to limit, withdraw, or suspend benefits granted under the
GSP program, CBI, or the Andean Trade Preference Act if the foreign government
act, policy, or practice at issue also fails to meet the eligibility criteria
for these programs. Under existing law, the Trade Representative can take
such action only at the direction of the President.
(2) Unreasonable Practices Related to Intellectual
Property or Anticompetitive Activities
Subsection (c)(1) amends the definition of an "unreasonable
act, policy or practice" for the purposes of section 301. The subsection
clarifies that the Trade Representative may determine that a country is
denying adequate and effective protection of intellectual property rights even
if the country is in compliance with the TRIPs Agreement. The subsection also
adds denial of nondiscriminatory market access opportunities for U.S. persons
that rely on intellectual property protection to the definition. Under
existing law, denial of such market access opportunities is expressly covered
only under section 182 of the Trade Act of 1974.
In addition, the subsection clarifies that the definition of
"unreasonable act, policy or practice" under section 301 regarding foreign
government toleration of systematic anticompetitive activities applies to: (1)
state-owned enterprises as well as private firms; (2) denial of fair and
equitable market access opportunities for U.S. services as well as goods; and
(3) anticompetitive practices that restrict the sale of U.S. goods or services
to a foreign market, not just to foreign firms that engage in such practices.
The purpose of this amendment is to ensure that section 301 can be used to
address the full range of anticompetitive practices that may be burdening or
restricting U.S. commerce.
In light of the importance the Administration and the
Congress attach to ensuring that foreign governments do not tolerate
anticompetitive practices, section 311 of the implementing bill amends section
181 of the Trade Act of 1974 to require the Trade Representative to include in
the annual National Trade Estimates Report on Foreign Trade Barriers (NTE
report) a separate section on foreign anticompetitive practices the toleration
of which by foreign governments is adversely affecting U.S. goods or services
exports. In preparing the NTE report, the Trade Representative will consult
in particular with the Department of Justice.
(3) Protection of Intellectual Property
Section 314(c)(2) amplifies the definition of "adequate and
effective protection of intellectual property" in section 301 to encompass a
broader range of intellectual property rights. Subsection (c)(2) also
provides a definition of "denial of fair and equitable nondiscriminatory
market access opportunities." Under the definition, access may be denied
through restrictions related to the use, exploitation, or enjoyment of
commercial benefits derived from exercising intellectual property rights. The
amendment will permit the Trade Representative to scrutinize foreign
government restrictions on commercial activities related to products protected
by intellectual property rights to determine if the restrictions discriminate
or are otherwise unfair or inequitable.
(4) Time Limits for Investigations
Sections 314(d) and 341(a) of the bill amends section 304 of
the Trade Act of 1974 and section 305 of the Trade Agreements Act of 1979,
respectively, to ensure that the timetables for investigations and
determinations under the enforcement provisions of U.S. trade laws allow DSU
dispute settlement proceedings to be completed before trade sanctions may be
imposed. For the most part, time periods established under U.S. law for
dispute settlement proceedings are already consistent with relevant DSU
Section 314(d) amends section 304(a)(2). The amendment
makes the 18-month deadline for determinations in section 301 investigations -- which currently applies to determinations in all section 301 investigations
involving trade agreements other than those involving the GATT Subsidies Code
-- apply to investigations involving the Code as well. Section 314(d) also
extends the reporting requirement of section 302(a)(4) to disputes arising
under the Code.
In addition, section 314(d) amends section 304(a)(3) of the
1974 Act to ensure that the standard 18-month time limit for making
determinations in section 301 investigations will apply to matters involving
the TRIPs Agreement where the investigation is initiated as the result of a
"priority foreign country" identification under the "special 301" provisions
of U.S. trade law (19 U.S.C. 2242). The six-month time limit in section
304(a)(3) will continue to apply to investigations involving intellectual
property and market access matters initiated as a result of a "priority
foreign country" identification where the TRIPs Agreement or another trade
agreement is not involved.
Sections 341(a) of the bill amends section 305 of the Trade Agreements Act of 1979, which establishes procedures for monitoring and enforcing the Agreement on Government Procurement. The amendment extends to 18 months the time permitted under section 305(f) for the conclusion of proceedings brought by the United States alleging a violation of that Agreement. The amendment also provides sufficient time for the country in question to implement an adverse panel or Appellate Body report and for the DSB to approve a U.S. request to retaliate before the United States removes procurement benefits for such country.
No similar amendment is required for section 301 proceedings
since, unlike section 305(f) of the Trade Agreements Act of 1979, section 301
does not automatically require the imposition of sanctions where the United
States wins a dispute settlement case under a trade agreement. For example,
in a section 301 investigation, the USTR is not required to apply sanctions if
the foreign country agrees to eliminate or phase out the measure in question
or to settle the matter in a mutually satisfactory manner. In such a case,
the USTR monitors compliance by the foreign country with any such undertaking,
as required by section 306 of the Trade Act of 1974, and is authorized to take
action if the foreign country fails to take the requisite steps.
e. Monitoring of Agreements to Resolve Section 301
Section 314(e) of the bill amends section 306 of the Trade Act of
1974, to require the Trade Representative to monitor the implementation of any
agreement or measure undertaken by a foreign government to resolve a matter
subject to a section 301 investigation, whether or not the Trade
Representative has made a determination under section 304 that the foreign
government's act, policy, or practice is unreasonable. Under existing law,
section 306 applies only when the Trade Representative has made such a
In addition, section 314(e) amends section 306 to impose a
deadline under that section for making a determination in trade disputes
submitted to WTO dispute settlement procedures. If the Trade Representative
considers that another country has failed to implement a WTO panel
recommendation satisfactorily in a case involving the United States, the
amendment requires the Trade Representative to determine, within 30 days after
the expiration of the "reasonable period of time" for implementation of panel
recommendations provided for in Article 21 of the DSU, what action to take
under section 301(a).
f. Identification of Trade Expansion Priorities
Section 314(f) of the bill amends section 310 of the Trade Act of
1974 (Super 301) to require the Trade Representative to review U.S. trade
expansion priorities and identify and report to the Finance and Ways and Means
Committees within 180 days of the submission of the National Trade Estimate
report for calendar year 1995 on the priority foreign country practices that
are likely to have the most significant potential to increase U.S. exports.
The Trade Representative may also cite in the report practices that may
warrant identification in the future or that were not identified because they
are already being addresssed and progress is being made toward their
elimination. Within 21 days after the report is submitted, the Trade
Representative must initiate section 301 investigations of any priority
practices identified in the report.
g. Consultations after NTE Report
Section 181 of the Trade Act of 1974 currently requires the Trade
Representative to keep the Finance Committee and appropriate House committees
informed regarding trade policy priorities for the purposes of expanding
markets. In order to provide for effective policy coordination regarding
foreign trade barriers identified in the NTE report, section 312 of the
implementing bill requires the Trade Representative to consult periodically
with those committees during the year following the issuance of the report,
and to take their views into account, regarding how best to address the
foreign trade barriers (including barriers to the provision of financial or
other services) identified in the report.
The consultations will include consideration of whether section
302 investigations (either self-initiated or initiated by petition) or other
trade actions may be appropriate to address barriers identified in the report.
With respect to consultations regarding any barriers to financial services
identified in the report, the Trade Representative will consider the Ways and
Means, Banking, and Energy and Commerce Committees to be the "appropriate"
House committees for purposes of section 312.
h. Annual Report on Intellectual Property Protection
Section 313 of the bill amends section 182 of the Trade Act of
1974, which requires the Trade Representative to identify priority foreign
countries that deny adequate and effective protection of intellectual property
rights, or fair and equitable market access for U.S. persons that rely on
intellectual property protection. New elements that the Trade Representative
will consider in making such identification include the history of
intellectual property laws and practices in the foreign country, whether the
country has been identified as a priority foreign country previously, and U.S.
efforts to obtain adequate and effective intellectual property protection in
Section 313 also clarifies that a country may be identified as a
priority foreign country even if it is in compliance with the TRIPs Agreement.
The TRIPs Agreement does not cover all aspects of intellectual property
protection that may affect U.S. persons seeking to protect or enforce rights
abroad. Moreover, the long transition periods in that Agreement may permit a
country to continue to deny adequate and effective protection of intellectual
property during that transition. As noted with regard to section 315 of the
bill, a key U.S. objective in the area of intellectual property is to seek
accelerated implementation of the TRIPs Agreement.
Identification of countries as priority foreign countries under
section 182 of the Trade Act of 1974 or placement of a country on one of the
"special 301 watch lists" has been an important part of the Administration's
efforts to achieve improved intellectual property protection and market
access. Section 313 of the bill amends section 182 to require the Trade
Representative to submit a report to the Ways and Means and Finance Committees
each year on actions taken under the "special 301" provision of section 182.
The report will describe actions taken during the preceding 12 months, the
reasons for such actions, and any progress made in achieving improved
protection of intellectual property rights and market access for persons
relying on intellectual property protection.
As a result of other amendments in Title III of the implementing
bill, the Special 301 annual report will encompass the subjects of copyright
and related rights (including textile design protection), patents,
semiconductor mask works, trade secrets, plant breeders's rights and
trademarks, as well as market access issues for persons that rely on
intellectual property protection. The report will focus on actions taken in
connection with those trading partners that are identified as priority foreign
countries under section 182, as well as those countries placed on the special
301 "priority watch list" and "watch list." The Trade Representative will
give particular attention in the report to those countries and practices that
have been the subject of public submissions over the prior year raising
specific intellectual property issues.
2. Administrative Action
a. Panel Reports and U.S. Sovereignty
Over the past several decades, the United States has invoked GATT
dispute settlement procedures to challenge actions by other governments more
frequently than any other country. U.S. laws and practices have also been the
subject of GATT challenges. Although the United States has prevailed in the
vast majority of disputes in which it has been involved, there have been
instances in which panels have found U.S. practices to be inconsistent with
Reports issued by panels or the Appellate Body under the DSU have
no binding effect under the law of the United States and do not represent an
expression of U.S. foreign or trade policy. They are no different in this
respect than those issued by GATT panels since 1947. If a report recommends
that the United States change federal law to bring it into conformity with a
Uruguay Round agreement, it is for the Congress to decide whether any such
change will be made.
Furthermore, neither federal agencies nor state governments are
bound by any finding or recommendation included in such reports. In
particular, panel reports do not provide legal authority for federal agencies
to change their regulations or procedures or refuse to enforce particular laws
or regulations, such as those related to human, animal or plant health, or the
environment. In addition, as noted elsewhere in this Statement, the United
States will not seek to introduce a panel report into evidence in any civil
suit brought by the United States challenging a state law or regulation on the
ground that it is inconsistent with a Uruguay Round agreement.
In normal circumstances where a panel report finds a U.S. law or
practice to be inconsistent with a Uruguay Round agreement, the United States
will agree with the other parties to the dispute on a resolution of the
dispute that is in conformity with the panel or Appellate Body
recommendations. Where the matter involves a law or regulation of a state of
the United States, any resolution would be reached in consultation and
coordination with the state concerned, as described in this Statement in
connection with the WTO Agreement.
The DSU recognizes that it may not be possible for a government to
agree to the removal of a measure that a panel has found to be inconsistent
with a Uruguay Round agreement. Accordingly, it provides for alternative
resolutions, including the provision of trade compensation and other
negotiated settlements, or the suspension of benefits equivalent to the
"nullification or impairment" of benefits caused by the offending measure. In
all cases following a panel report, the DSU leaves to the discretion of the
United States any change in federal or state law and the manner in which any
such change may be implemented -- whether through the adoption of legislation,
a change in regulation, judicial action, or otherwise.
b. Enforcement of U.S. Rights
During the Uruguay Round negotiations, U.S. negotiators took pains
to ensure that U.S. laws dealing with foreign unfair trade practices,
including section 301 of the Trade Act of 1974, would remain fully effective.
Since it was enacted, section 301 has been the principal U.S. statute for
addressing foreign unfair practices that adversely affect U.S. exports of
goods and services. Section 301 authorizes the Trade Representative to take
action, subject to the direction of the President, against acts, policies, or
practices that are inconsistent with, or deny benefits under, trade agreements
or that are unreasonable, unjustifiable, or discriminatory and burden or
restrict U.S. commerce.
Since 1974, the Congress has amended section 301 several times to
strengthen it and ensure that it covers the full range of foreign barriers
affecting U.S. exports. In 1979, following the negotiation of a number of new
GATT codes in the Tokyo Round, Congress amended section 301 to ensure that it
would be used to enforce U.S. rights under trade agreements and to respond to
practices that deny U.S. benefits under such agreements.
In 1984, Congress made clear that section 301 can be used to
address foreign unfair practices affecting U.S. services trade, foreign
investments, and intellectual property rights, and that the Administration can
respond to such practices by applying sanctions against services from the
country in question. In 1988, the Congress enacted a number of amendments to
section 301 to strengthen its procedures still further, including the addition
of provisions covering worker rights and toleration of anticompetitive
practices. These changes have helped to make section 301 an increasingly
effective tool in opening foreign markets.
The Administration intends to use section 301 to pursue vigorously
foreign unfair trade barriers that violate U.S. rights or deny benefits to the
United States under the Uruguay Round agreements. The Administration equally
intends to use section 301 to pursue foreign unfair trade barriers that are
not covered by those agreements. This is what Congress intended in the
Omnibus Trade and Competition Act of 1988 when, on the one hand, it made a
more effective and expeditious dispute settlement mechanism the first
principal U.S. negotiating objective and, on the other hand, the Congress made
major modifications to strengthen section 301 for use against both those
practices falling within and outside trade agreements to which the United
States is a party.
The Administration expects that as a result of the Uruguay Round
agreements in general, and the Dispute Settlement Understanding in particular,
section 301 will be even more effective than it has been in the past in
addressing foreign unfair trade barriers.
Currently, when a GATT panel finds that a government's complaint
concerning an alleged GATT violation is justified, the defending country can
indefinitely "block" adoption of the panel's report, leaving the matter
unresolved. Moreover, even when such a panel report is adopted, the GATT
Council typically is unwilling to authorize retaliation -- even if the
violation persists over an extended period. For example, when the United
States obtained adverse GATT panel reports against the European Community in
section 301 investigations involving oilseeds, citrus, and pasta, the cases
remained unresolved for a number of years, prompting the United States to
impose or threaten retaliation as a last resort in the absence of GATT
authorization to do so.
That situation will change once the Uruguay Round agreements enter
into force. First, defending countries will no longer be able to block
adoption of adverse panel reports. Second, countries that bring successful
challenges will be authorized to withdraw Uruguay Round trade benefits from
the offending country if, after a reasonable period following adoption of the
panel or Appellate Body report, the matter cannot be settled in a mutually
satisfactory manner. These changes mean that when the United States brings a
successful challenge against another government under the DSU, the United
States will have improved leverage to insist that the defending government
remedy its violation. If the violation persists, the United States will be
automatically entitled to take action under section 301.
Furthermore, the Uruguay Round agreements will substantially
enhance the ability of the United States to use section 301 successfully to
pursue unfair foreign practices in the areas of trade in services and the
protection of intellectual property rights. That is not simply because the
Uruguay Round agreements subject those areas to the disciplines of a
multilateral trade agreement for the first time. It is also because the DSU
permits "cross-retaliation." For example, when the United States successfully
challenges a violation of the TRIPs Agreement, the defending government will
know that unless the matter is resolved the United States can take equivalent
counter-action under section 301 against that country's exports of goods to
the United States. In the past, most retaliation against imports from GATT
countries would have run afoul of U.S. obligations under the GATT and could
have engendered counter-retaliation.
Although it will enhance the effectiveness of section 301, the DSU
does not require any significant change in section 301 for investigations that
involve an alleged violation of a Uruguay Round agreement or the impairment of
U.S. benefits under such an agreement. In such cases, the Trade
invoke DSU dispute settlement procedures, as required under
base any section 301 determination that there has been a
violation or denial of U.S. rights under the relevant
agreement on the panel or Appellate Body findings adopted by
following adoption of a favorable panel or Appellate Body
report, allow the defending party a reasonable period of
time to implement the report's recommendations; and
if the matter cannot be resolved during that period, seek
authority from the DSB to retaliate.
Neither section 301 nor the DSU will require the Trade
Representative to invoke DSU dispute settlement procedures if the Trade
Representative does not consider that a matter involves a Uruguay Round
agreement. Section 301 will remain fully available to address unfair
practices that do not violate U.S. rights or deny U.S. benefits under the
Uruguay Round agreements and, as in the past, such investigations will not
involve recourse to multilateral dispute settlement procedures.
For example, with minor exceptions, the Uruguay Round agreements
do not address government measures that encourage or tolerate private,
anticompetitive practices. Should the Trade Representative elect to
investigate the failure by a foreign government to take action against
systematic, anticompetitive distribution practices, including reciprocal
dealing, exclusivity or tying arrangements, that deny access to U.S. firms,
section 301 would remain fully available to challenge such a failure. Section
301 will also remain available to address persistent patterns of conduct by
foreign governments that deny basic worker rights and burden or restrict U.S.
Moreover, the mere fact that the Uruguay Round agreements treat a
particular subject matter -- such as intellectual property rights -- does not
mean that the Trade Representative must initiate DSU proceedings in every
section 301 investigation involving that subject matter. In the event that
the actions of the foreign government in question fall outside the disciplines
of those agreements, the section 301 investigation would proceed without
recourse to DSU procedures.
Some foreign government practices may involve a number of actions,
some of which are covered under the rules imposed by the Uruguay Round
agreements and some of which are not. In section 301 investigations involving
mixed actions of this kind, the Administration intends to continue the current
practice of initiating dispute settlement proceedings against actions falling
under a trade agreement and addressing other actions through bilateral
There is no basis for concern that the Uruguay Round agreements in
general, or the DSU in particular, will make future Administrations more
reluctant to apply section 301 sanctions that may be inconsistent with U.S.
trade obligations because such sanctions could engender DSU-authorized
counter-retaliation. Although in specific cases the United States has
expressed its intention to address an unfair foreign practice by taking action
under section 301 that has not been authorized by the GATT, the United States
has done so
infrequently. In certain cases, the United States has taken such action
because a foreign government has blocked adoption of a GATT panel report
Just as the United States may now choose to take section 301
actions that are not GATT-authorized, governments that are the subject of such
actions may choose to respond in kind. That situation will not change under
the Uruguay Round agreements. The risk of counter-retaliation under the GATT
has not prevented the United States from taking actions in connection with
such matters as semiconductors, pharmaceuticals, beer, and hormone-treated
Finally, nothing in the DSU will affect application of section 301
against practices by governments that either are not WTO members or by WTO
members to which the United States does not apply the Uruguay Round
agreements. The Trade Representative will address section 301 investigations
of unfair trade practices by such countries on a bilateral basis.
c. Anticompetitive Practices
Among the foreign government practices that section 301(d)(3)(B)
of the Trade Act of 1974 defines as "unreasonable" are those that deny fair
and equitable market opportunities, including the toleration by a foreign
government of systematic anticompetitive activities. The Administration will
enforce vigorously the "toleration of . . . anticompetitive activities"
provision in section 301 when appropriate to address foreign anticompetitive
behavior. The practices covered by the provision include, but are not limited
to, toleration of cartel-type behavior or toleration of closed purchasing
behavior (including collusive coercion of distributors or customers) that
precludes or limits U.S. access in a concerted and systematic way.
The Trade Representative, in consultation with the Attorney
General, will look to a variety of information sources in evaluating a foreign
government's toleration of anticompetitive practices. Issues to be addressed
include the existence of the anticompetitive practices and whether there was
an unreasonable failure to take timely action against them. In making an
assessment, the Trade Representative will consider whether the pertinent
foreign government, and especially its competition authorities, have been made
aware of the alleged practices and, if so, how they were informed, the
relevant evidence that has been provided to, or is known to be available to,
the foreign authorities, and the nature of response those authorities have
The evidence provided to, or known to be available to, a foreign authority normally should include, among other things, the identity of the enterprises allegedly involved and the relevant markets affected, a description of the specific practices, and an indication of their duration and pervasiveness. In keeping with the Congressional intent in adopting this provision, the Trade Representative will also take into account whether the anticompetitive activities are inconsistent with the foreign country's own laws, how systematic and pernicious those activities have been, and their degree of effect on U.S. domestic or foreign commerce.