U.S. - European Union Disputes in the World Trade Organization

Summary

U.S.-EU relations have been affected by a number of trade disputes in recent years. While the

majority of trade disputes do get resolved, attempts to settle some of the disputes have been met with

refusal or inability by one or another of the parties to comply in a timely manner with the World

Trade Organization (WTO) panel rulings. The 108th Congress inherits several of these disputes

where the WTO has ruled that U.S. laws violate trade obligations. Absent U.S. compliance through

legislative action, the EU could in some cases decide to retaliate against U.S. exports this year or

next. In the meantime, the EU remains in non-compliance with its WTO obligations to allow

imports of beef treated with hormones. Beyond raising U.S.-EU trade tensions, non-compliance by

a key WTO member arguably weakens the credibility and authority of the WTO and its dispute

settlement process.

The initiation and resolution of disputes under WTO agreements is carried out under the

Uruguay Round Dispute Settlement Understanding (DSU), considered a cornerstone of the WTO

system. The WTO dispute settlement process has a more quasi-judicial orientation than the

quasi-diplomatic orientation of the prior GATT system, in which negotiation and conciliation

generally prevailed over multilateral enforcement of rules. The DSU provides for virtually automatic

establishment of panels, adoption of panel and appellate reports and, where requested, authorization

to impose retaliatory measures; deadlines are set out for various stages of the process. These features

ensure that complaints are heard and promote implementation of WTO rulings, thus making

available to all WTO Members the means to clarify trade rules and redress trade injury. At the same

time, the process continues to retain certain diplomatic elements in that its primary aim is to "secure

a positive solution to a dispute," with the preferred outcome being a "solution mutually acceptable

to the parties to the dispute and consistent with the covered agreements." Opportunities for

settlement are provided at a number of points in a procedure.

U.S. and EU instances of longstanding non-compliance have for the most part not involved

routine commercial disputes over trade or customs regulations, but rather tax policy and internal

national regulation, particularly of social and health matters. While ambiguity in WTO agreements

may give rise to disputes in these difficult areas, the automatic features of the DSU also allow parties

to pursue such cases through the full dispute process, even though it may be evident from the outset

that implementation of an adverse WTO ruling may be subject to overwhelming domestic opposition

in the defending country. To deal with the problem of non-compliance in difficult cases, both

Washington and Brussels may need to give greater attention to a number of concerns and policy

considerations, including choice of cases initiated, limitations on panel decisions, role of mediation

and conciliation, and adoption of remedies that are trade liberalizing. Assuming that some disputes

are not well-suited for the DSU process, greater efforts may be needed to settle differences through

bilateral negotiations and political compromises, through mediation, or by agreeing to arbitration

from an outside ( i.e. , non-WTO) party. This report will be updated periodically. For

more on the

WTO dispute settlement process and U.S.-EU Trade Relations, see CRS Report RS20088 and CRS Issue Brief IB10087.