The WTO Loses Friends on the Hill


By Paul Magnusson Had Congress known in 1995 that the fledgling World Trade Organization would repeatedly overrule the U.S. on major tax and trade laws, would Congress have voted to have the U.S. join? Not likely. And when the chance to bolt the 147-member body comes up next year in a reauthorization bill, Congress may decide to drop membership in the Geneva-based organization.

In the meantime, though,Washington must deal with a blizzard of costly legal decisions from the WTO's secretive three-member panels, which have the authority to determine whether U.S. laws comply with WTO rules.

STRING OF REVERSALS. In the latest decision, passed down on Aug. 31, a WTO panel authorized the European Union, Japan, Canada, Mexico, and three other nations to levy $150 million in penalty tariffs on U.S. exports.

The tariffs are to make up for a U.S. law passed in 2000 that the WTO says violates its international trade rules. The U.S. is already facing $4 billion in potential penalty tariffs that the WTO authorized the EU to impose on U.S. exports. The WTO said last year that an income-tax subsidy violates international trade laws.

The Aug. 31 decision follows earlier, wide-ranging rulings that invalidated the U.S. cotton-farm subsidy program, struck down U.S. attempts to ban Internet gambling, and overturned U.S. tariffs on Canadian lumber. Last year, the WTO forced President George W. Bush to rescind the temporary tariffs he had levied on imported steel.

NEVER DISCUSSED. The latest U.S. law to be struck down was passed in 2000 without any congressional hearings and a minimum of debate. Introduced by Senator Robert Byrd (D-W.Va), it was a last-minute amendment to an unrelated appropriations bill . The so-called Byrd Amendment requires that the U.S. Treasury pay aggrieved U.S. companies the penalty tariffs charged to foreign exporters deemed to be selling their goods at below fair prices in the U.S. Prior to the amendment, the Treasury kept the import levies.

The latest defeat for the U.S. was widely anticipated. Senate Finance Committee Chairman Charles Grassley objected in 2000 that the Byrd Amendment hadn't received any hearings before his committee. "I'm not surprised that a bill that was never considered by the committee of expertise or even the full Senate was found to violate our international commitments," Grassley said on Aug. 31.

The Congressional Government Accountability Office (GAO) has already noted that $25 million was overpaid from the U.S. Treasury to U.S. companies and that the Customs & Border Protection agency doesn't properly check to see if U.S. corporate claims on the funds are valid. Also, the payments from the Treasury exacerbate the record budget deficit.

ELECTION-YEAR POLITICS. The WTO ruling and criticism from Grassley and the GAO and an Aug. 31 promise from the Bush Administration to "work with Congress" to change the law doesn't mean that the Byrd Amendment will be quickly rescinded, experts say.

Congress hasn't been willing to comply with the other WTO rulings, either, despite the mounting financial penalties authorized by the trade group. The reason: In an election year, neither party wants to alienate the multinational corporations that bankroll so much of the race. In the end, Congress might find that it's easier to leave the WTO than to change so many U.S. laws. Magnusson is a correspondent in BusinessWeek's Washington bureau


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