Senate Finance Committee Discusses Influencing WTO Reform

Former U.S. trade representative Rob Portman, now a Republican senator from Ohio, offered that he and Sen. Tom Carper, D-Del., have written a resolution that provides direction to USTR on what reform should look like. He said he'd like the WTO to allow plurilateral agreements that exclude non-participants from the benefits; he wants special and differential treatment to apply only to “truly disadvantaged countries;” and past Appellate Body decisions on safeguards and countervailing measures have to be corrected “and not deemed to be precedential.”

Portman said during the hearing that when he testified as USTR in front of the committee in 2006, “I criticized overreach by the Appellate Body on antidumping rules and on zeroing.”

He asked if the committee could consider the resolution in September, so that the “world sees we’re not just complaining, we have some specific solutions.”

Finance Committee Chairman Chuck Grassley, R-Iowa, did not commit to that, but said he would consider it, depending on the schedule.

Former Appellate Body member Jennifer Hillman, now a senior fellow at the Council on Foreign Relations, said she doesn't think ending binding dispute settlement is in the U.S.'s interest, and she said she doesn't think Congress wants that either. She said that blocking all appointments to the Appellate Body did get other countries to finally take U.S. complaints about overreach seriously, but said that the U.S. refusal to table a reform proposal or even to say what it likes in others' proposals makes it less likely to get reform, not more.

“Already the rest of the world is moving ahead without the United States,” she said, noting that 22 countries have agreed to binding arbitration now there that is no appeals function in the WTO.

Grassley said he is also concerned that at some point, this arbitration system will no longer be seen as an interim solution, and that the U.S. “will lose leverage at some point.”

Hillman said the good news is that if the stopgap system gets appeals done in 90 days and doesn't find rules that aren't in the founding WTO documents, it could show how Appellate Body reform could be done. She said that fixing the Appellate Body is achievable, and doing so will improve the likelihood of successful negotiations, and will give countries more leverage over China.

Thomas Graham, a partner at Cassidy Levy Kent, disagreed with Hillman that the U.S. is hurting itself with its current approach. “There should be no rush to restart the appellate body… . That would be to give away our leverage and admit fault,” he said. He said he places “a considerable amount of blame on the European Union” for the WTO having reached this point.

“I don’t readily see how the dispute settlement system can be reformed or the Appellate Body can be reformed until core members come to grips with how China fits in the WTO,” he said.

A prominent European Commission trade staffer said he believes that reform has to be done in stages, with Appellate Body first, China second (see 2007230051).

As senators questioned the witnesses, some argued that the WTO is not on the side of their constituents.

Sen. John Thune, R-S.D., said of the dispute settlement system: “They certainly seem to go against us a lot.” He said that Congress has acted more than once to pass country of origin labeling (COOL) for beef, and it has been ruled out of bounds.

Joseph Glauber, a senior research fellow at the International Food Policy Research Institute, said that beef cuts that come in from Canada or Mexico come in labeled as Canadian or Mexican, and the COOL struggle was about animals that are raised part of their lives in those countries, but are finished and slaughtered in the U.S.

“Generally we’ve done very, very well” on agriculture issues at the WTO, he said.

Sen. Sherrod Brown, D-Ohio, asked Hillman how trading rules are useful at all, because he sees them as written for multinational corporations, not for workers. She said that domestic policy needs to be aligned with trade policy, and there need to be more supports for retraining. When he asked her if he's wrong that trade agreements serve corporations, not workers, she replied: “I think it’s a more complicated question than that. The major benefit of trade agreements is to open new doors. And the question is who walks through that door once it’s opened -- [it's] those who have capital and know how.” She said low-skill workers' desire to not compete with foreign competition is not taken as much into account.

Brown fired back: “Trade agreements, they say they’re about opening up markets, but they’re also a green light for corporations to move and take advantage of cheaper unskilled labor, which outcompetes on a not-level playing field more expensive labor in another country. That’s what happens in many trade agreements, and enforcement I think you’ve been involved in.”