WTO sees more trade disputes ahead after vintage year

GENEVA Fri Dec 14, 2012 12:36pm EST

World Trade Organization Director General Pascal Lamy reacts before a news conference on annual trade forecast and statistics at the WTO headquarters in Geneva April 12, 2012. REUTERS/Denis Balibouse

World Trade Organization Director General Pascal Lamy reacts before a news conference on annual trade forecast and statistics at the WTO headquarters in Geneva April 12, 2012.

Credit: Reuters/Denis Balibouse

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GENEVA (Reuters) - A surge in trade disputes has forced the World Trade Organization to reallocate staff to cope with a flood of litigation in the pipeline for 2013, according to diplomats and documents at the global trade body in Geneva.

The WTO's 157 members have launched 26 trade disputes so far in 2012, the most since 2003 and three times more than the eight new complaints filed in 2011.

According to an internal WTO document seen by Reuters, the WTO decided to reallocate staff to the disputes team to deal with the increasing number and complexity of legal cases.

"We are seeking to reallocate resources from other divisions. It's happening already," said one WTO source.

As well as moving staff, the trade body also advertised for a senior dispute settlement lawyer, at a starting salary of around 161,900 Swiss francs ($175,300), and is seeking short term candidates to help deal with the caseload.

The boom in litigation comes as the WTO struggles to get back on the path to reforming its rules, after the failure of the decade-old Doha round of trade negotiations last year.

"The less you negotiate the more you litigate, and vice versa," said one trade diplomat.

The resort to the dispute settlement system signifies both trust in the global trade rules and distrust among its members, as they fight for a share of a pie that is not quite shrinking, but expected to grow by a mere 2.5 percent this year.

Although the WTO expects global trade growth to quicken to 4.5 percent in 2013, that would remain below the annual average of 5.4 percent over the past two decades.

WTO Director General Pascal Lamy will report to WTO members on the global trading environment on Monday, armed with a report showing they had brought in 308 new trade-restricting policies, covering 1.3 percent of traded goods, over the past 12 months.

"The difficulties and concerns generated by the persistence of the global economic crisis, with its many facets, are fuelling the political and economic pressures put on governments to raise trade barriers," Lamy's report says. "This is not the time to succumb to these pressures."

US AND CHINA UNDER FIRE

The countries attracting most complaints in 2012 were China and the United States, each the target of six disputes. The United States also initiated the most disputes - three against China and one apiece against Argentina and India.

This year's new disputes included many that were either apparent tit-for-tat actions or counter-challenges, ensuring that the heat was concentrated in certain areas.

Solar power components were the subject of several disputes, as accusations flew that China's over stimulated producers had flooded the world with cheap supply. China hit back with its own claims against the United States and the EU, alleging that the U.S. case was illegal and renewable energy markets in Italy and Greece were rigged in favor of local firms.

Other recent disputes have taken aim at countries using environmental or health concerns as trade barriers, such as China's export restrictions on rare earths and Australia's tough cigarette packaging laws.

One of the most fertile areas for potential new disputes in 2013 is trade-distorting subsidies, whether overt or covert.

The United States and China are already wrangling over the legality of Beijing's alleged subsidies and Washington's attempts to root them out.

But China was hit from an unexpected angle in October when Mexico launched a wide-ranging complaint about China's support for exports of clothes and textiles.

Eight WTO members - including the EU, United States, Brazil and Australia - asked to observe the case as interested third parties but, in a highly unusual move, China refused to admit any of them, cloaking the dispute in even more secrecy than is usual and fuelling speculation that it is concerned about others building their own case against Beijing.

Covert subsidies include "local content" rules, where a country makes sure local firms get a certain cut of government projects at the expense of foreign competitors.

Appetite for "local content" disputes has been boosted by a case against Canada brought by the EU and Japan, which Canada is expected to lose.

China has already brought the complaint against renewable energy rules in Italy and Greece, while the EU, United States and Japan have repeatedly criticized local-content rules in Brazil, India, Indonesia and Nigeria.

More disputes could also come from this year's addition of Russia to the WTO. The EU has said it is ready to take open legal cases on several fronts, and the United States has said Russia's rules on meat imports appear to be inconsistent with WTO rules.

(Reporting by Tom Miles; editing by Jason Webb)

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