WTO Upholds Section 301 of Trade Act

(January 29, 2000) The World Trade Organization rejected a complaint from the European Union that Section 301 of the Trade Act of 1974 is not WTO-consistent. "Special 301" decisions by the USTR are a primary means of protecting the intellectual property rights of U.S. companies abroad.

The World Trade Organization (WTO) Dispute Settlement Body (DSB) adopted the report of a dispute settlement panel upholding the WTO-consistency of Section 301 of the Trade Act of 1974. Last month the panel rejected a complaint by the European Union (EU) that Section 301 was inconsistent with WTO rules.

The EU will not appeal the ruling.

Section 301 is the statutory means by which the United States asserts its international trade rights, including its rights under WTO Agreements. In particular, under the "Special 301" provisions of the Trade Act of 1974, the U.S. Trade Representative (USTR) identifies trading partners that deny adequate and effective protection of intellectual property or deny fair and equitable market access to U.S. artists and industries that rely upon intellectual property protection.

The EU filed its complaint against the United States with the WTO on November 25, 1998. The WTO established a panel to review the complaint on March 2, 1999. This panel issued its report on December 22, 1999. The WTO Dispute Settlement Body adopted this report on last week.

The European Commission's complaint was contained several distinct technical objections to the statute. The EC did not complain about in specific decision made by the U.S. under Section 301.

The WTO published on overview which summarized the complaint as follows:

"The EC contends that by imposing strict time limits within which unilateral determinations must be made and trade sanctions taken, sections 306 and 305 of the Trade Act do not allow the US to comply with the rules of the DSU in situations where a prior multilateral ruling under the DSU on conformity of measures taken pursuant to implementation of DSB recommendations has not been adopted by the DSB."

"The EC further contends, that the DSU procedure resulting in a multilateral finding, even if initiated immediately after the end of the reasonable period of time for implementation, cannot be finalised, nor can subsequent DSU procedure for seeking compensation or suspension of concessions be complied with, within the time limits of sections 306 and 305. The EC alleges that Title III, chapter 1 (sections 301-310) of the Trade Act, as amended, and in particular sections 306 and 305 of the Act, are inconsistent with Articles 3, 21, 22 and 23 of the DSU; Article XVI:4 of the WTO Agreement; and Articles I, II, III, VIII and XI of GATT 1994.

"The EC also alleges that the Trade Act nullifies and impairs benefits accruing, directly or indirectly, to it under GATT 1994, and also impedes the objectives of GATT 1994 and of the WTO."

USTR Charlene Barshefsky

"We are pleased that the WTO has now formally confirmed the panel's conclusion that Section 301 is consistent with U.S. WTO obligations," stated U.S. Trade Representative (USTR) Charlene Barshefsky in a press release on January 27. "Today's action by the WTO closes the door on the EU's unfounded claims regarding the legitimacy of Section 301. Section 301 has been and will remain essential to our efforts to enforce our international trade rights."

However, the EU put a different spin on the decision. The EU released a statement which concluded that "The Panel concluded that the relevant part of the legislation as such was inconsistent with the WTO. It also came to the final conclusion that it could be considered in conformity with the WTO--but only because the US undertook before the Panel that in each and every case it would use its discretionary powers under Section 301 to act in compliance with WTO rules and procedures."

"This is a fair result, a balanced outcome to a difficult case, but overall, it is a victory for the multilateral system," said Pascal Lamy, the EU Trade Commissioner.

"Neither side can claim a triumph, because while the Section 301 legislation can stay on the books, the Panel has clarified that it can be used against other WTO members only as long as it strictly follows WTO rules. I am glad the US have given the necessary commitments to this effect," said Lamy.

The WTO currently has two other active panels considering complaints against the U.S. for other alleged violations pertaining to intellectual property.

First, on January 26, 1999 the EU complained that Section 110(5) of the Copyright Act (Fairness in Music Licensing Act) violates U.S. obligations under the TRIPS Agreement and the Berne Convention.

This section permits, under certain conditions, the playing of radio and television music in bars, stores, restaurants, and other public places without the payment of a royalty fee.

Second, on July 8, 1999, the EU complained that Section 211 of the Omnibus Appropriations Act of 1998 (pertaining to trademark registrations and renewals) violates U.S. obligations under the TRIPS Agreement and the Paris Convention.

This section makes it impermissible to register or renew a trademark if it was previously abandoned by a trademark owner whose business assets have been confiscated by Cuba.