PLAYING THE TRADE-PANEL GAMEImagine a game that is hockey on one side of the field and football on the other side. Then imagine that each team brings its own rulebook and its own referees. If you don't like a referee's call, you can appeal to another set of refs from either the World Wrestling Federation or the Olympic Water Polo establishment, or both—unless you prefer to take your chances with a committee from the Professional Golf Association. Decisions on appeal are nonbinding anyway. However, the team that wins an appeal may be authorized to dump out the other team's water cooler, if they can find it.
Now you've got a sense of what the rules of international trade are like. Each country regulates its own industries in its own way and can penalize imports it thinks are unfair. But the United States, Canada, and Mexico are also partners in two different international trade treaties: the three-way North American Free Trade Agreement (NAFTA) and the much broader World Trade Organization (WTO), which includes countries in Europe, Asia, and Africa.
David Gantz, director of the International Trade Law Program at the University of Arizona's Rogers College of Law, explains: “Essentially we have a parallel process. The decisions of the U.S. Commerce Department (which determines the dumping margins and the amount of the subsidy) and the U.S. International Trade Commission (which determines the injury or the threat of injury) normally, if it were not for NAFTA, would go to the Federal Court of International Trade in New York. Under NAFTA Chapter 19 they go to these bi-national panels, but those panels are supposed to apply U.S. trade law.” But there's also an appeals process through standing panels of the WTO, says Gantz, which apply the WTO's rules and precedents within the global agreement on subsidies, dumping, and countervailing penalties.
STRIKE THAT: Obscure rules and overlapping jurisdictions have left all sides in the trade dispute crying foul.
In the Canadian lumber case, some WTO and NAFTA decisions have been sharply at odds. For instance, the U.S. determination that Canadian exports threaten the U.S. industry has been held to conform with WTO rules; but NAFTA panels held that the threat-of-injury determination violated U.S. law.
The lumber case is the first major example of contrary WTO and NAFTA rulings on the same issue, says Gantz, and has created unprecedented confusion: “Now you've got this ridiculous situation where the U.S. is saying, ‘Well, we won at the WTO so we don't have to pay attention to this conflicting NAFTA opinion,' and the Canadians are saying, ‘Wait a minute, you've gotta follow both of them.' And we haven't really had this kind of a conflict before.”