Retaliatory threats or sanctions declared after a pro-U.S. GATT/WTO panel ruling are taken as GATT/WTO legal ‘suspensions or withdrawals of concessions’, even if the decision to retaliate is adopted unilaterally. For retaliation to be indisputably legal under GATT, it had to be agreed upon by consensus by the GATT Council Meeting, but a single country –and the target country in particular– could always block that decision. The arbitration procedure only exists since 1995, and is based on the WTO Dispute Settlement Understanding negotiated in the Uruguay Round.
Figure 5.5 shows the different types of retaliation by outcome, differentiating those cases in which there was a GATT/WTO ruling favorable to the U.S. The categories are mutually exclusive (the sum of the bars adds up to 117). In 17 cases of failure, sanctions were imposed in seven. The other outcomes present more dispersion, cases in which threats were not invoked are evenly split (with 20, 23 and 21 instances of no retaliation, against 11, 16 and 6 instances of any type of retaliatory action). The cases of compensation / arbitration are coded like partial successes;
although the target country does not remove the barrier, the U.S. is vindicated in its complaint.
All cases in which retaliation was only threatened somehow moved up the scale of effectiveness: not a single episode of threat ended up in failure. On the other hand, in 7 occasions
Figure 5.5: Retaliatory threat under Section 301 by outcome
10
No ruling No ruling Pro-US ruling No ruling Pro-US ruling No ruling Pro-US ruling
Source: DBM.
Compensation refers to a compensation agreement offered by the target country after a pro-US ruling.
Arbitration refers to WTO arbitration on the level of suspension of concessions under DSU Article 22.6.
No retaliation
Threat Sanctions
Compensation Arbitration
Figure 5.6: Retaliation by GATT/WTO status
No member Not actionable No case GATT case WTO case
No ruling Pro-US ruling No ruling Pro-US ruling
Source: B&E, B&R, DBM, WTO.
Compensation refers to a compensation agreement offered by the target country after a pro-US ruling.
Arbitration refers to WTO arbitration on the level of suspension of concessions under DSU Article 22.6.
No retaliation Threat
Sanctions Compensation / arbitration
in which sanctions were imposed, the target country decided not to react. Finally, in seven cases in which the U.S. prevailed at the multilateral level, it still had to take action to achieve a favorable outcome, which it did in five cases; this without counting the cases of compensations.
Figure 5.6 shows the episodes of retaliation by GATT/WTO status of the target country, the measure, and the dispute. The higher ratio of retaliatory threats and sanctions is against non GATT/WTO members (issued in half of the cases). Disputes against members on measures not covered by the multilateral agreements were not spared; hit-lists were issued in 8 out of 17 of these cases.
For multilateral disputes, the picture is striking. Not a single episode of retaliatory threat or sanction has been registered since the Uruguay Round agreements entered into force, besides those legitimized by arbitration panels; indicating that countries tend to fulfill their obligations under the WTO. Under the GATT, Section 301 target countries got used to being retaliated against when they would not abide by panel rulings; it happened in seven occasions, with two additional cases of negotiated retaliation, out of 11 cases. This Figure is telling regarding the countries lack of commitment with multilateral adjudication before 1995 and the GATT’s lack of
‘teeth’.
5.3.1 No retaliation
Table 5.3 cross-tabulates GATT/WTO status and outcome for the 73 cases in which retaliation was not invoked. Of the 16 cases that could not be filed multilaterally, the U.S. achieved at least
Table 5.3: No retaliation
partially its goals in 6 occasions and failed twice, with 8 nominal agreements. Out of the 14 cases in which the U.S. could have filed a dispute and decided not to do so, large or partial gains were achieved in 12 occasions.
The record on the multilateral cases is highly positive under the WTO; much less so under the GATT, in which it is a known fact that the U.S. resolve and effort in pursuing a case would not be necessarily rewarded. Read vertically, more than two thirds of failures and large successes Figure 5.7: Retaliation and GATT/WTO rulings
Compensation refers to a compensation agreement offered by the target country after a pro US ruling.
Arbitration refers to WTO arbitration on the level of suspension of concessions under DSU Article 22.6.
Threat pre ruling Sanctions pre ruling Threat post ruling Sanctions post ruling Compensation Arbitration
Table 5.4: Retaliation and Section 301 outcomes
were GATT/ WTO cases, while only half of the middle outcome cases were.
5.3.2 Retaliation
Figure 5.7 shows retaliation by country. Retaliation was invoked against 13 countries, although only four countries were confronted to the more legitimate process of withdrawal of concessions
Figure 5.8: Retaliation, counter-retaliation and counter-suits
following a bad outcome at a dispute settlement panel, for a total of 12 instances: the EC, in 7 occasions, Canada and Japan twice and Korea once (out of 14, 7, 5 and 2 occasions respectively).
The extra case with respect to the previous graphs is case 25 against the EC in which the ruling was considered to be mixed. The remaining 32 cases were unilateral threats, most probably illegal and arbitrary, and contested for the most part.
Table 5.4 cross-tabulates the outcomes by type of retaliation and outcome, with rather mixed results, except for recent cases of arbitration or compensation.
5.3.3 Counter-retaliation and countersuits
Figure 5.8 considers all cases in which the U.S. retaliated or suspended concessions following a favorable GATT or WTO panel ruling; with details on counter-retaliation or on eventual countersuits filed by the target country.
Only the EC and Canada counter-retaliated on a Section 301 case, three times and once respectively; while the EC, Canada, Japan, Brazil and Sweden filed one or more countersuits against the U.S.