ABSTRACT
This chapter presents a case study, which looks at the ineffectiveness of an existing international regime, the General Agreement on Tariffs and Trade (GATT), to resolve a dispute between two members. The United States argued that the GATT rules required compensation to be made to the sector being harmed. Because US farmers were being harmed by the change in tariffs, it was they who should be compensated. The GATT rules on compensation were sufficiently ambiguous as to be unhelpful in resolving the dispute between the European Community (EC) and the United States. The EC's equally long-standing legal position held that the GATT requires parties forming a customs union to compensate third parties only if those nations’ interests are damaged on the whole, not on a product-by-product basis. US officials questioned whether the United States would benefit from the decrease in Spanish and Portuguese industrial tariffs. EC enlargement, like EC origins, was driven by political as well as economic objectives.
