Wednesday, November 02, 2005

Th First World Trade War

(via Lenz Blog) Last March, the WTO's Appellate Body confirmed the ruling against the United States in the case of cotton subsidies (DSB 267). This case was brought by Brazil against the United States arguing that the cotton industry in that country is obtaining subsidies from the government that are contrary to trade rules included in the Subsidies and Countervailing Measures (SCM) Agreement, calculated at around $140.000 USD per farmer. The argument by Brazil and other developing countries is that the subsidies make it impossible for their agriculture industries to compete in the global market, as the subsidies bring prizes down. On the other hand, the other greatest subsidiser (the EU) supported the United States in this.

The U.S. lost the case, the subsidies were deemed to be in violation of international trade rules, and was therefore asked to stop the subsidies and bring their legislation in compliance. So far the compliance has not been forthcoming.

This is just the latest case in a series of rulings that have gone against the U.S. in international trade issues in which they are not implementing the ruling, such as the Canadian lumber case. This has prompted questions about the validity of the international trade mechanism, and allows other countries to ask the question of why they should comply. This is dangerous territory at a time that American copyright industry is trying to get China to comply with its TRIPS commitments and stop piracy.

This could open the door for a global trade war, with countries reverting to the protectionist principles before the WTO. Most importantly for the U.S. is the threat by Brazil that they might as well allow the massive copying of American movies and music, and to allow the production of patented pharmaceuticals.

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