International Trade Lawyers - More fun in 2013!

Reuters reported recently that the WTO is bracing itself for the surge in trade disputes in its dispute settlement mechanism. 2013 is going to see an increase in trade disputes.

"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."

The increase in trade disputes points out to a number of conclusions:

1. The faith WTO members repose int he rule-based dispute settlement process - the "crown jewel" of the WTO system. This reliance is also causing a strain on the system with the WTO apparently having to reallocate staff to meet the growing dispute count.

2.Negotiations are moving at a slow pace with Doha tottering. Political negotiations and judicial dispute resolution are two facets of the multilateral institution. If one fails to progress, the other is burdened with the responsibility of tackling many of the issues international trade faces. Hence, experts argue that the dispute settlement mechanism is facing the heat due to the failed Doha round. There has to be a safety valve somewhere. Whether it addresses the new reality of trade, including global supply chains and RTAs is another issue.

3. Countries are increasingly using the dispute settlement process as part of an overall national strategy to engage with the multilateral system. They do not view it just as a judicial process. National policies are defended here and policies of other countries that impact market access of a country's products are challenged here. A trade dispute is no longer viewed as a trade war. It is increasingly being used as a tool in the overall trade policy strategy of a country engaging in the multilateral system.

Legal capacity, technical expertise and a diverse team of lawyers, trade policy analysts and economists need to come together in handling a dispute. Some disputes are extremely complex matters involving the use of econometric models and trade statistics. Also, some of these disputes (like the Canadian FiT case, Airbus-Boeing Subsidies case) are going to have a lasting impact on the renewable energy sector.

Overall, 2013 is going to be fun for International Trade Lawyers worldwide.

Compliance time in the Airbus-Boeing dispute?

The Airbus-Boeing subsidies for large civil aircrafts dispute is a longstanding one. With the Appellate Body of the WTO giving its decision in both cases and coming to the conclusion that large subsidies were given by the U.S. and the EU in case of Boeing and Airbus respectively the stage is now set for a prolonged wrangling over what constitutes compliance. I have blogged about the issue here, here and here.

In a USTR press release, the United States submitted indicated it had complied with the Appellate Body decision. The submission made to the WTO is here. The submission showed that NASA, U.S. Department of Defence, Federal Government, State of Washington and City of Wichita were the stakeholders in the complex quagmire of subsidy disbursement.

The highlights of the claims of compliance were:

"3. The National Aeronautics and Space Administration (“NASA”) has modified the rights accorded to the parties under the contracts listed in Annex A so as to make them consistent with commercial practice. These modifications apply to all of the NASA contracts covered by the recommendations and rulings of the DSB. NASA has made identical modifications, as necessary, with regard to contracts subsequent to those covered by the recommendations and rulings of the DSB, without prejudice to the U.S. view that those contracts were not subsidies causing adverse effects to EU interests. These contracts are also listed in Annex A. 

4. NASA has terminated the Advanced Composites Technology, High Speed Research, Advanced Subsonic Technology, High Performance Computing and Communications, Quiet Aircraft Technology, Vehicle Systems, and Research and Technology Base programs, and reduced funding for aeronautics research contracts with private parties under other aeronautics research programs. NASA has changed its policies so as to remove limitations on access to the results of NASA research and development efforts, including by ceasing the use of limited exclusive data rights (“LERD”) clauses. NASA has implemented a policy of seeking greater prompt disclosure of the results of its sponsored research when it purchases research and development services from private entities. 

5. The U.S. Department of Defense (“DoD”) has modified the rights accorded to the parties under the cooperative agreements, technology investment agreements, and Other Transactions listed in Annex B so as to make them consistent with commercial practice. The modifications apply to all of the DoD assistance instruments covered by the recommendations and rulings of the DSB. DoD made identical modifications with regard to contracts subsequent to those covered by the recommendations and rulings of the DSB, without prejudice to the U.S. view that those contracts were not subsidies causing adverse effects to EU interests. These contracts are also listed in Annex B. 

6. DoD has ceased funding of the following programs: Dual Use Application and Dual Use Science and Technology (Program Element (“PE”) 0602305F); Navy Manufacturing Technology (“ManTech”) (PE 0603771F); Air Force ManTech (PE 0708011F); Defense Advanced Research Projects Agency research on the Joint Strike Fighter (PE 0603800E); Army research related to the Comanche (PE 0604223A); Air Force research on the B-2 (PE 0604240F); and Air Force research on A-6 Squadrons (PE 0604240F). 

7. The United States enacted legislation terminating the Foreign Sales Corporation and Extraterritorial Income (“FSC/ETI”) tax benefits. 

8. The United States has confirmed that Boeing did not use FSC or ETI tax benefits after 2006. 

9. The State of Washington is applying rates of Business and Occupancy Tax (“B&O”) for aerospace manufacturing and retailing consistent with Article 5(c) of the SCM Agreement. 

10. The City of Wichita is applying its Industrial Revenue Bond (“IRB”) program in a manner consistent with Article 5(c) of the SCM Agreement. It has not provided any IRBs to Boeing since 2007." 

The compliance report indicates either a modification or a cessation of many programs hitherto being implemented by NASA, DoD, the Federal Government as well as the State of Washington. While the opinion whether this actually constitutes compliance or is sufficient to determine that a “genuine and substantial relationship of cause and effect” no longer exists between the subsidies subject to the recommendations and rulings of the DSB and any adverse effects within the meaning of Article 5(c) of the SCM Agreement is a matter of interpretation, this is a classic example of domestic measures being impacted by global trade rules. National policies being implemented by various agencies in the context of U.S. Aircraft manufacturing needed to be modified in order to comply with a WTO decision. Whether this is a sufficient modification or compliance to the WTO decision is a different issue. The EU would certainly dispute the claim of compliance unless there already has been an understanding on this diplomatically and politically.

Over to the EU to provide its list of compliance measures with respect to Airbus subsidies?

Update: The EU HAS disputed the claim of compliance by the U.S. More on that for tomorrow!