OPEC WTO Legislation Introduced

From a press release by Senator Frank Lautenberg:

Late last week, U.S. Sen. Frank R. Lautenberg (D-NJ) introduced legislation to force action against the Organization of the Petroleum Exporting Countries (OPEC) for its anti-competitive practices and illegal export quotas on oil, which ultimately lead to higher gas prices here at home.

    “While OPEC and the oil companies have seen record profits, American families are paying record gas prices at the pump,” Sen. Lautenberg said.  “The illegal actions of OPEC nations have gone on for too long, and it is time to stand up to this cartel and protect the interests of the American people.”

    Sen. Lautenberg’s bill would require the United States Trade Representative to initiate consultations with countries that are members of both OPEC and the World Trade Organization (WTO).  If consultations failed, the U.S. would request that the WTO convene a dispute settlement panel to judge the case.  If the case were decided in the U.S.'s favor, OPEC would be required to cease its illegal operations or the U.S. would be able to impose trade remedies.

    ...

    Under WTO rules, countries are prohibited from placing restrictions on exports.  Yet despite this prohibition, by negotiating among themselves, OPEC sets export quotas for each of its member nations, and is able to exercise a great deal of control over the international price of oil.

...

    The bill, the OPEC Accountability Act of 2008 (S. 2964), is co-sponsored by Sens. Carl Levin (D-MI), Byron Dorgan (D-ND), Bob Casey (D-PA) and Bernie Sanders (I-VT).  It is based on similar legislation Sen. Lautenberg first introduced in 2004.

Note the statement that "OPEC sets export quotas for each of its member nations."  If they can prove that, maybe they have a case.

Here is the bill: http://www.govtrack.us/congress/billtext.xpd?bill=s110-2964  From the Congressional "Findings" in the bill: "The agreement among OPEC member nations to limit oil exports is an illegal prohibition or restriction on the exportation or sale for export of a product under article XI of the GATT 1994."  Obviously, converting these Congressional findings into WTO panel findings is going to be their challenge. 

The specific actions they complain about are somewhat broader than I expected:

(1) IN GENERAL- Notwithstanding any other provision of law, the President shall, not later than 15 days after the date of enactment of this Act, initiate consultations with the countries described in paragraph (2) to seek the elimination by those countries of any action that--

(A) limits the production or distribution of oil, natural gas, or any other petroleum product;

(B) sets or maintains the price of oil, natural gas, or any petroleum product; or

(C) otherwise is an action in restraint of trade with respect to oil, natural gas, or any petroleum product, when such action constitutes an act, policy, or practice that is unjustifiable and burdens and restricts United States commerce.

Comments

[Vydyanathan Lakshmanan]

Isn't the Canada-water analogy applicable here? On the lines of that argument, as long as oil is not tapped from wells, it would continue to be a 'natural resource' and not a 'product', subject to WTO disciplines.

[Jeffrey Peng]

Should it be submitted to DSB, it would be the first WTO case with regard to the examination on export licensing and quota under GATT 1994 Article XI. In Argentina - Measures Affecting the Export of Bovine Hides and the Import of Finished Leather , only export restrictive procedure was evaluated by the panel. In that case, EC claimed Argentina's presence of tanners' representatives, access to confidential information and abuse of such information in export inspection procedure violated Article XI, but the panel found that the causation was insufficiently evidenced. Another relevant WTO case is United States - Measures Treating Export Restraints as Subsidies. However, that case only refers to the violation of SCM. Thus I regard the potential dispute between the OPEC and the US as a very valuable one. It would be more valuable probably for world economy, esp. in the current period of high commondity price and high inflation.