Trade Briefing Paper No. 9

WTO Report Card II: An Exercise or Surrender of U.S. Sovereignty?

By William H. Lash III and Daniel Griswold
May 4, 2000

Critics across the political spectrum allege that the World Trade Organization undermines the ability of the United States to determine its own trade, tax, environmental, and foreign policy. But an examination of how the WTO really works reveals that no such threat exists to U.S. sovereignty. The WTO is a contract organization that arbitrates disputes among its members on the basis of rules that all have agreed to follow. Like every other member, the United States has the power to veto any agreement of which it disapproves.

The WTO wields no power of enforcement. It has no authority or power to levy fines, impose sanctions, change tariff rates, or modify domestic laws in any way to bring about compliance. If a member refuses to comply with rules it previously agreed to follow, all the WTO can do is approve a request by the complaining member to impose sanctions — a “power” that member governments have always been able to wield against each other. The WTO’s dispute settlement mechanism actually makes the use of sanctions less likely.

The WTO’s basic charter contains explicit exemptions for broad categories of trade restrictions. Under the WTO charter, members can enact trade restrictions for reasons of national security, public health and safety, and conservation of natural resources and to ban imports made with forced or prison labor. Such barriers are not subject to challenge by other WTO members.

The same dispute settlement mechanism that can render judgments against U.S. laws has been used effectively to encourage other nations to scrap trade laws that discriminate against exports from the United States.

Membership in the WTO is not a surrender of U.S. sovereignty but its wise exercise. The WTO encourages the United States to keep its own markets open for the benefit of U.S. consumers and import-using industries. WTO membership also promotes trade liberalization abroad, which opens markets and keeps them open for U.S. exporters.

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William H. Lash III is a professor of law at the George Mason University School of Law in Fairfax, Virginia. Daniel T. Griswold is associate director of the Cato Institute�s Center for Trade Policy Studies.