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The WTO has achieved greater success in the enforcement of international trade law than its predecessor, the GATT. Nevertheless, recent trade disputes between the US and Europe over bananas, hormone-treated beef, genetically modified food, telecoms and Airbus subsidies have highlighted the weaknesses in the WTO's dispute-settlement mechanism. Ambiguity surrounds the rules on compliance for decisions rendered by the WTO's dispute panels. This has enabled the EU to delay bringing its illegal banana regime in line with two WTO panel decisions. The US responded by imposing immediate 100% duties on 14 EU products before the WTO delivered its assessment of the injury suffered by the US as a result of the EU's discriminatory import rules.

There is growing concern that such actions will undermine the WTO's authority as the enforcer of world trade law. While many are calling upon the WTO to specify the measures that countries need to take in order to comply with its rulings, it is unlikely that the US or the EU would support prescribed compliance regulations. Trade relations between the US and the EU have also worsened due to America's belief that the EU has not assumed its fair share of the burden in assisting struggling emerging economies by being receptive to their imports.

There is a sense of urgency surrounding efforts to bring China, the world's 10th largest trading nation, into the WTO before the new round of talks and the US presidential race commence. Although subsidies, quotas, monopolies and price fixing remain common features of the Chinese economy, average tariff levels on imports have decreased from 43% to 17% in recent years. The US and China are close to reaching an agreement on the subject. However, even if America's trade ambassador is able to reach an agreement with the Chinese, it is possible that Congress may not approve the deal. The United States' Congress has turned protectionist as a result of its record-high trade deficit. Furthermore, anti-Chinese sentiments are strong due to China's large bilateral trade surplus with the US and recent revelations that Chinese spies have been stealing US nucelar secrets.

The G-8 members will likely discuss trade in services, agriculture and investment as well as non-tariff barriers and the environment. They will also focus on improving the WTO's dispute settlement mechanism and the integration of developing countries into the multilateral trading system.

Compiled by: Suzanne Murphy
June 1999