The Predictable Fallout from Doha

Following the collapse of the Doha round of multilateral trade negotiations last month, WTO members have chosen to pursue their trade objectives through litigation.

Brazil (through its foreign minister, Celso Amorim) said Wednesday (eastern Australian time) that it plans to ask for billions of dollars of punitive damages from the United States in retaliation for U.S. cotton subsidies (more on that dispute here). The precise figure has yet to be released, but the United States has lost at every point in this dispute and although the Office of the United States Trade Representative plans to defend the subsidies “vigorously,” another loss for the U.S. would be expected. (Note that in WTO litigation proceedings, ‘damages’ aren’t paid by check; rather, the aggrieved member is given permission to retaliate by suspending its own obligations to the errant member. Usually this involves the injured party raising tariffs on the errant member’s exports, economically insane though that action might be.)

The United States has joined the melee by making preliminary legal moves of its own–against China. In a communication to the WTO posted on Monday, the United States listed its grievances as a series of questions to China about its allegedly discriminatory tax treatment for domestically-reared pork, as well as other subsidies. The United States has pitched these questions as part of the “transitional review mechanism” that was part of the deal when China joined the WTO but it could form the basis of a dispute settlement action if the questions aren’t addressed to the United States’ satisfaction.

The collapse of the Doha round, as well as political pressure to enforce the terms of trade agreements and to save special firepower for China, is bearing predictable fruit.