WTO ruling draws teeth of US 301 law, says EU

GENEVA, Jan 28: The European Union said yesterday a World Trade Organisation panel ruling on the United States' controversial "301" law on retaliation in trade disputes had reduced it to a weapon without teeth, reports Reuters.

In a discussion on the ruling in the WTO's Dispute Settlement Body (DSB), EU ambassador Roderick Abbott said the panel had left no doubt that if the US applied the law to other WTO members it would be breaking open trading rules.

The stance was backed by Japan which said the report confirmed that the United States could not take unilateral actions in trade disputes without waiting for approval by the DSB - a collective grouping of the WTO's 135 members.

But the United States insisted that the three-man panel had cleared "301" - under which in the past countries accused of trade offences by Washington have had sanctions placed on their goods - as consistent with WTO regulations.

Abbott said that for the EU the report was "an important outcome for the preservation and proper functioning of the WTO multilateral system."

The panel - whose report like many WTO rulings was couched in legal terminology open to varying interpretations - had concluded that the US law was illegal and could only be maintained if, in effect, it were not applied.

EU officials have said the report reduced "301" - seen by many US Congressmen as a key instrument of the country's trade policy - to "a weapon without teeth."

They argue that the outcome of the case - brought to the WTO by the EU with the implicit backing of many other countries - meant the United States could not decide alone that another member of the WTO was breaking the rules and impose sanctions.

But US ambassador Rita Hayes told the DSB on Thursday that the panel had in fact concluded that the law was consistent with Washington's commitments to observe WTO rules.

The panel made its ruling after receiving what officials said were assurances from the United States that the law would not be applied in a way that violated WTO accords.

Abbott said the fact that both Brussels and Washington had accepted the conclusions and had not appealed showed that the outcome meant "no-one wins, no-one loses" and would ensure more stability for trade.

But diplomats said another case brought by the EU which another panel is currently studying could resurrect the problem.

In that dispute, Brussels complains that by announcing sanctions under 301 against the EU in their long-running banana dispute before a final ruling had been handed down by WTO arbitrators Washington had violated its WTO commitments.