Welcome to this hearing of the International Trade Subcommittee on dispute settlement and the World Trade Organization. Before we begin the hearing, I would like to make two brief announcements.
First, it has been reported that the United States will offer a new agricultural trade negotiating proposal at the second Special Session of the WTO Committee on Agriculture in Geneva later this month. This appears to be a very substantial proposal. I don't want to go into any of the details here, because that might be a disservice to our negotiators. But I want to commend you, Ambassador Barshefsky, as well as Ambassador Rita Hayes and her staff at our WTO Mission in Geneva, for your good work. This is something that we will watch very closely as events unfold in Geneva, because breaking down barriers to trade and gaining market access means so much to farmers.
Second, this is one of two hearings the trade subcommittee will hold this year on the WTO. The first hearing, with WTO Director-General Mike Moore, has to be rescheduled. Unfortunately, Mr. Moore had to cancel his trip to the United States in order to prepare for the Special Session later this month. Mr. Moore has written to me expressing his regrets, and assures me he will try to reschedule his trip for sometime in July. I will keep the subcommittee members informed about developments.
Now, to today's hearing. This hearing is about dispute settlement. Dispute settlement is the backbone of the multilateral trading system. It is about how the 137 WTO Member nations resolve their trade conflicts quickly and peacefully. It is about upholding carefully negotiated trading rules so that workers and consumers get a better deal. It is about giving the smallest and least developed countries the same rights under the rules as the wealthiest developed nations.
Today, we will take a broad look at dispute settlement, so we can see the complete picture. This is not a hearing just about specific cases. That's one of the problems we have had in looking at the WTO, and the United States role in the WTO. We have tended to focus on specific cases, like the beef hormones case, and not look at the larger context. But without the larger context, we can't appreciate how dis
pute settlement works, or what it means for the United States.
During its first five years of operation, about 200 complaints have been filed in the WTO. The United States has been a party to 42 cases that have either reached a final conclusion, or resolved without a ruling. As one of our witnesses today from the GAO will tell us, the United States has gained more than it has lost in settling these disputes.
The United States has been able to effectively enforce our international trading rights because of the way we have improved the dispute settlement system. The improvements in the dispute settlement system are perhaps the most significant feature of the World Trade Organization. We can better appreciate the new dispute settlement system if we recall how dysfunctional the old GATT system of resolving international trade disputes often was.
Let me list just a few of the worst problems. In the early GATT, dispute settlement was basically a diplomatic exercise. Most of the panelists, the judges, were diplomats. Their rulings were often vague, and hard to pin down. Panel reports had to be approved by consensus. This meant the losing party could block adoption of reports. In fact, parties who anticipated losing sometimes even blocked the establishment of a panel to hear the case. Effective enforcement was almost nonexistent. The only real sanction was unilateral retaliation.
Small countries were at a particular disadvantage. They had a very hard time in achieving effective results against large countries. With the signing of the WTO Agreement, and the creation of the Dispute Settlement Understanding in 1995, we have fixed most of these problems. The changes in the rules have, in my view, proven to be very positive. Without these changes, we would not have predictable, enforceable rules.
Without predictable, enforceable rules, disputes would drag on for years, with no clear or final resolution. Small, low-income nations would be especially harmed, because they would not have a fair chance to defend their rights. Without predictable, enforceable rules, the rule of the jungle, not the rule of law, would control. Small exporters would have little chance to compete in international markets where their larger competitors could do almost whatever they wanted.
About two-thirds of United States businesses that export have 20, or fewer, employees. It is these small firms that would be at the greatest disadvantage without effective WTO trading rules. If we could not protect the rights of these small exporting firms in international markets, consumers would have fewer choices, and would end up paying more for what they buy.
Could we improve the dispute settlement system? Clearly, yes. We could open up the process more, and make it more transparent. We could sharpen and streamline the rules, or draft new rules on the length of submissions by parties, for example, so litigation doesn't get needlessly bogged down. I certainly welcome the suggestions of our witnesses on these matters.
Finally, the trading rules we will talk about today are the one thing standing between us and the sort of economic isolationism that marked the years just before World War II, especially the 1930s, and which many, including myself, believe contributed to the Great Depression and the onset of a devastating world war. When nations can discriminate against one another in trade, and disregard the rights and livelihoods of others in the economic sphere, they pave the way for the rise of anti-democratic forces that are the real enemies of peace. By breaking down trade barriers that lead to isolationism, misery and misunderstanding, our international trading rules play a vital role in keeping the peace