TRADE-COMMODITIES: South Triumphs in WTO’s First Fight

By Humberto Márquez Reprint | | Print |

Humberto Marquez

CARACAS, Jan 19 1996 (IPS) - The developing South won the first fight refereed by the World Trade Organisation (WTO), when Brazil and Venezuela forced the US to withdraw supposed “environmental” restrictions on petrol imports.

The Southern nations claimed the measures were veiled protectionism, and the WTO decided the US must change its regulations.

In 1995, the US Environmental Protection Agency (EPA) decided that imported petrol had to meet the environmental standards which domestic supplies only had to fulfil by 1998.

Washington has 60 days to appeal after the WTO passes its verdict on the 29th, but if the appeal gets nowhere they will have to change the rules, or suffer trade sanctions.

This measure affected part of the 60,000 barrels of petrol exported from Venezuela to the United States, causing opportunity cost losses of around 50 million dollars per year to the South American nation.

Venezuelan Minister of Foreign Trade, Werner Corrales, said the decision “shows the capacity of the WTO to resolve differences is an essential and effective resource for the developing countries when they are faced with restrictive trade measures.”

These measures “are adopted by the industrialised countries in violation of their international obligations,” he added, stressing that protectionism was really behind the facade of environmental concern.

Energy Minister, Erwin Arrieta, said the WTO decision would “normalise the situation,” as Venezuelan products were being segregated “in an unfair manner” from a market whose environmental regulations it was already fulfilling.

Washington said its main trade negotiator, Mickey Kantor, would be considering what legal action to take, and the possible appeal to the WTO.

“The United States is caught up in the net of international trade regulations,” said The Wall Street Journal, on publishing the verdict this week.

Only last week, the United States decided not to impose sanctions on Colombia and Costa Rica for their banana export agreement with the European Union (EU).

The US felt this agreement was prejudicial to its transnational Chiquita brands, and was ready to take the case to the WTO.

Latin America thus saw “the regional principle that all commercial controversy must be resolved multilaterally,” said Manuela Tanfel, director of economic relations in the 27-nation Latin American Economic System (SELA).

The precedent was set for the recent WTO decision when the GATT (General Agreement on Tariffs and Trade), decided in Mexico’s favour when the US tried to impose an environmental import tax on Mexican petrol.

The controversy over reformulated petrol began early this decade, when the US Clean Air Act prepared a plan to gradually reduce contamination from motor vehicles by the year 2,000.

When the EPA established different rules for domestic and foreign petrol, Venezuela protested to GATT, backing down in 1994 after the US agreed to suspend the restrictions.

However, at the close of 1994, US Congress blocked funding for the EPA petrol monitoring system which supervised imports from Venezuelan Petroleum (PDVSA), and Petrobras of Brazil, Total of France, the Japanese Itochu and Finnish Nesty.

The US parliamentarians who promoted the measure said they were defending their national petrol producers, as well as the environment, and PDVSA understood the move as part of its closed competition with the US companies.

Director of Venezuelan Petroleum (PDVSA), Luis Guisti, “its a relatively minor issue within the two nation’s energy cooperation.”

The WTO simply “ratified the opinion which this country always maintained. We never lost our influence in the US market,” he added.

PDVSA is owner of Citgo, an oil refinery and petrol distribution network with 12,000 outlets in the eastern and south eastern United States.

Citgo has become the main inlet for 1.4 million barrels of crude oil and petrol derivatives from Venezuela, the US’s second most import source of foreign fuel after Saudi Arabia.

The US Congress decision was taken 14 months ago, and the WTO has an 18 month time limit within which to resolve cases, unlike the years of discussions which occured under GATT.

Brazil jumped on the bandwagon with the Venezuelan demand, even though its share of the US market is much smaller, winning a great victory for the south from the WTO.