Posts tagged ‘World Trade Organization’

11/28/2011

WTO: Should U.S. Sue China Over Trade?

In international trade, Gov. Romney argued in the Republican debates that we have been run over by China. Although he does not want a trade war, he believes we are being used. He said he would issue an Executive Order identifying China as a currency manipulator, because they artificially set the prices of their goods below market levels. He would sue China in the World Trade Organization (WTO), because the Chinese do not play by the rules. He wants to win the right to impose tariffs against them.

Former Gov. Huntsman worried if we won the right to impose tariffs, we would get the same in return, because we manipulate our currency, and a trade war would only hurt our exports. He questioned whether the WTO even allows currency issue disputes.

What would a U.S. complaint in the WTO against China involve?

The WTO, the world’s primary trade organization, with 153 member nations, came into being in 1994. China joined in 2001. Each WTO country has an obligation to conform their laws to the basic agreements that make up the organization. Rules, such as those forbidding unfair trade, are enforced against member states.

Dumping and the providing of subsidies are considered unfair trade practices. Dumping involves bringing goods into a country at less than their normal value. Governmental subsidies that distort product prices are also forbidden. Where there is a violation, states cannot take unilateral action, but must sue.

The WTO, based in Geneva, Switzerland, has a Dispute Settlement Body (DSB) which presides over the resolution of trade disputes between member states. WTO nations agree in advance to submit to the compulsory jurisdiction of the DSB. When one nation files a complaint against another, alleging a violation of WTO rules, they must first try negotiation.

If negotiations fail, the DSB sets up a 3-member ad hoc Dispute Settlement Panel. Each party submits written arguments, known as submissions. Experts are consulted. The Panel considers the facts and then issues a Panel Report in English, French and Spanish, which may include an order to remove inconsistent measures, give the injured country the authority to retaliate with tariffs against certain products, or they may grant restitution.

After the Panel Report is approved of by the DSB, the losing party may file an appeal. The WTO has a standing 7-member Appellate Body drawn from different geographic areas. New facts are not heard on appeal, as reviews are limited to alleged errors of law.

The U.S. would have the burden of proving China engaged in unfair trade practices, such dumping or illegal subsidies. Even if a violation by China was shown, Huntsman is correct, because the Chinese would certainly file a countersuit against the U.S., claiming we provide subsidies and also violate the WTO rules. If China won their case, we would have to prepare for losses in our export businesses, as a result of tariffs imposed against our goods.

06/14/2011

WTO Governs U.S. Economy

The U.S. and 22 other countries signed the General Agreement on Tariffs and Trade (GATT) in 1947 for the purpose of reducing tariffs and trade barriers throughout the globe. Today, the GATT is administered by the World Trade Organization (WTO), and it governs global trade for 146 member states, and 29 observers.

The GATT grants normal trade relations to all members, which means all counties who join are entitled to the same treatment. Nations must treat goods imported from one member, the same as their own. Any privilege extended to one, automatically applies to others. The goal of the GATT, via the WTO, is to repeal all nationally imposed tariffs, quotas, and barriers to trade.

The GATT specifically bars tariffs on imports, in excess of any taxes applied to domestic goods. It prohibits import quotas, quantitative restrictions, the dumping of foreign goods at less than normal value, voluntary export restraints, and technical regulations that discriminate against foreign goods. It seeks to end government subsidies that distort market prices.

During the first 47 years of the GATT (1947-94), their rules were enforced voluntarily, or many times not at all. When the World Trade Organization (WTO) was formed (1994) to enforce the GATT, the most significant change, was the creation of a Dispute Settlement Body (DSB) to try cases and impose sanctions.

Now, member states, usually at the request of private industries, file complaints in the DSB, and allege breaches of the GATT. If the DSB finds a violation of the GATT, it has the authority to order retaliatory sanctions against the guilty states. If the U.S., for example, proved another country discriminated against American exports, they would be allowed to impose tariffs on the violator.

Understanding the nature of the power yielded to the WTO is important, particularly in presidential election years. If candidates are well-read, they avoid promising tariffs to keep Chinese goods out, since they know such barriers would only cause the WTO to allow China and others to retaliate against U.S. exports. Smart politicians know we no longer govern our own economy and that the WTO is in control. In the upcoming presidential race, it’s high time one of them leveled with the American public.

04/12/2011

Mexicans Need Jobs, Not Drug Wars

Another 13 dead bodies were found in the State of Tamaulipas, south of Texas along the Gulf of Mexico, and it appears the drug war in Mexico will not be over with any time soon.

Some say it is simple supply and demand and that as long as there is a demand for drugs in the U.S., people will continue to get involved in Mexico on the supply side.

Another explanation is that there are so few good paying jobs in Mexico that the business of selling drugs is one of the only ways for Mexicans to make any money.

Mexico, with a large population of 112 million, has significant economic troubles. Beginning in the 1960s, tourism increased in Cancun, Puerto Vallarta and at other historical sites, but that industry alone could not, and cannot, support Mexico’s economy.

There was hope that reducing barriers to trade would lift Mexico into a more prosperous future, as Mexico and the U.S. signed the North American Free Trade Agreement (NAFTA) (1994) and joined the World Trade Organization (1995), but half of the Mexican work force remains under-employed, and a large number continue to seek jobs in the U.S.

Mexicans have looked for work in the drug trade, because there are few opportunities elsewhere. Conducting a war on drugs without offering alternate employment has not worked and will not work. The war on drugs has been going on a long time. It started when President Nixon first tried to intercept the flow of marijuana from Mexico in 1969, but it did not work. The current phase of the 42-year-old drug war began when Mexican President Calderon took office (2006), but his efforts also will not succeed, since they are not addressing the economic causes of the problem.

When typical Mexican workers begin to have good paying jobs and something better to do than run drugs across the border, the practice of producing and selling them will fade from the scene. The Mexican government should focus on doing something positive, like creating jobs, and when they accomplish that goal, poor young Mexican men may no longer be tempted to turn to drugs as a vocation.

03/21/2011

Brazil: Time to Trade in South America

President Obama did the right thing by leading a mission to Brazil for the purpose of improving U.S. trade in South America.

Brazil and the U.S. need to become stronger trading partners.  Brazil has much to offer in terms of natural resources. It is physically the largest South American state. Its width can be pictured by considering the fact that the Trans-Amazon Highway runs 3,400 miles from the Atlantic, in the east, to Peru, in the west. Brazil, with 200 million people, also has a large population. Its customer base is second in the Americas, only to the U.S.

Many Americans still harbor images of Brazil as a military dictatorship. Military juntas ruled from 1930 through 1954 and again from 1964 through 1985. They set aside constitutional law and dissolved political parties. They heard civilian cases in military courts. They denied individual rights. Political prisoners were subjected to torture and death squads.

But the days of military rule are gone. During the Jimmy Carter presidency, Human Rights became an issue worldwide. Brazil implemented reforms in 1979, and ended military rule in 1985, as the people voted again for the first time in decades. Brazil recently acknowledged their history of human rights abuse and moved on. Last year, they elected their first female president. Internationally, they have served on the Security Council 10 times since WWII. If the UN Charter were being drafted today, they certainly would be in line for a permanent seat.

Brazil is now a leading global economy. They joined the World Trade Organization 16 years ago. They are an industrial state that produces cement, steel, iron and vehicles. They are no longer limited to just coffee, corn and rice. 89% of their people are now literate. They host 33% of the top 100 Latin American colleges. Their scientists set off a controlled nuclear chain reaction, 54 years ago already. They launched a rocket into space in 2004.

The U.S. will never again have the preferred trading status it enjoyed during the 25 years following WWII, when Europe and East Asia were flat on their backs. It is a competitive world now and the U.S. must improve trade relations with other nations and particularly with developing states like Brazil.