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Wednesday, June 23, 2010

World Trade Organization (WTO): Issues in the Debate on Continued U.S. Participation

Raymond J. Ahearn
Specialist in International Trade and Finance

Ian F. Fergusson
Specialist in International Trade and Finance

Following World War II, the United States led efforts to establish an open and nondiscriminatory trading system with the expressed goal of raising the economic well-being of all countries and bolstering world peace. These efforts culminated in the creation of the General Agreement on Tariffs and Trade (GATT) in 1948, a provisional agreement on tariffs and trade rules that governed world trade for 47 years. The World Trade Organization (WTO) succeeded the GATT in 1995 and today serves as a permanent body that administers the rules and agreements negotiated and signed by 153 participating parties, as well as a forum for dispute settlement and negotiations. 

Section 125 of the Uruguay Round Agreements (P.L. 103-465), which is the law that approved and implemented the agreements reached during the Uruguay Round of multilateral trade negotiations, provided that the U.S. Trade Representative (USTR) must submit to Congress every five years a report that analyzes the costs and benefits of continued U.S. participation in the WTO. The USTR submitted its report to Congress on March 1, 2010, triggering a 90 legislative day timetable in which any Member of Congress may introduce a privileged joint resolution withdrawing congressional approval of the WTO Agreement (to date no withdrawal resolution has been introduced in the 111th Congress). 

Most observers maintain that U.S. withdrawal from the WTO is at best highly unlikely for both substantive and procedural reasons. Substantively, the withdrawal of U.S. participation could undermine a multilateral system of trade rules and practices, formulated and implemented under U.S. leadership, that on balance has contributed to increased economic prosperity and security at home and abroad. Procedurally, a withdrawal resolution would have to pass both the House and Senate and then surmount a likely Presidential veto via an override with a two-thirds majority vote. Nevertheless, such a resolution provides an opportunity for Members of Congress periodically to debate "whether the WTO is an effective organization" and ways it could better serve U.S. interests. 

The purpose of this report is to analyze some of the main issues in any debate on U.S. participation in the WTO and to address some of the criticisms leveled at the organization. Academic studies indicate that the United States benefits from broad reductions in trade barriers worldwide, but some workers and industries might not share in those gains. Decisions in the WTO are made by member governments, which determine their negotiating positions, file dispute challenges, and implement their decisions. However, some argue that smaller countries are left out of decision-making and that governments tend to represent the interests of large corporations disproportionately. 

The United States has been a frequent participant in WTO dispute proceedings, both as a complainant and as a respondent. There have been complaints that countries do not adhere to decisions and that U.S. trade remedy laws have not been judged properly. It is also argued that this multilateral dispute settlement process is unique and that the United States has successfully used the process to advance its economic interests. 

Certain advocates for the environment, food safety, labor, development, and financial regulation have criticized the WTO. Much of the criticism is based on interpretations of various WTO agreements or rulings that have been controversial. An appendix sets out the legislative procedures for the WTO withdrawal resolution.

Date of Report: June 16, 2010
Number of Pages: 41
Order Number: R41291
Price: $29.95

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