Published reports indicate that the World Trade Organization has ruled in favor of a European Union complaint against America over tax subsidies to American corporations. At the same time, Iran has told both the E.U. and America that diplomatic efforts to stop its nuclear development are useless. We use sticks to discipline our friends and carrots to entice our adversaries.

Founded in 1995 to promote international trade, the WTO is the forum where friends complain about one another and threaten legal sanctions. Its 148 member nations include practically all of the major world economies, and a great many lesser ones. The WTO has become so declasse that even Cuba is a member, and even Iran and Libya seek membership. Member nations of this treaty organization agree to various principles of trade as well as dispute resolution mechanisms. Each year, the WTO receives about two dozen formal complaints, several of which are aimed at America.

In 2001 and 2002, in response to a 1997 E.U. complaint, the WTO ruled that America unlawfully used tax preferences to subsidize exports of “foreign sales corporations.” Rather than ignore the WTO ruling, Congress passed the 2004 JOBS Act, part of which repealed the tax preferences for exports, despite widespread political reservations. The E.U. was not satisfied, and earlier this year complained to the WTO that the 2004 JOBS Act was inadequate in repealing tax preferences, some of which allegedly persist for a few years.

Over the past decade, the WTO has heard vitriolic trade disputes among America, the E.U., and their major trading partners. American complaints include allegations of European subsidies of Airbus. European complaints range from unfair tax subsidies for large corporations to the absurdities of American anti-dumping laws. Most of our other major trading partners – Canada, Japan, and Mexico – have also filed formal complaints at the WTO against us. At times, we have reciprocated.

Our government invests substantial resources principally through the U.S. Trade Representative’s Office in the WTO and its processes. So, too, do our friends, most of our major trading partners. The WTO has become the equivalent of an international court where America and its friends litigate trade disputes. More amazingly, countries change laws to comply with WTO decisions. The litigation is costly, and complying with WTO decisions even more costly.

While America and Europe snipe, other countries flout the very foundation of international law. Brazil recently threatened to break the patent for the AIDS medication Kaletra unless Abbott Laboratories made concessions. In confronting Brazil, a country with a poor history of protecting intellectual property, Abbott took the unprincipled but seemingly rational position of negotiating a deal. Now that Brazil has demonstrated that Abbott and other pharmaceutical companies can be bullied, other countries will be emboldened to follow suit.

Iran and North Korea flaunt their development of nuclear technology. Other nations watch in horror, but do nothing to threaten these countries financially or legally, much less militarily. Indeed, many nations suggest negotiations with rogue states and offer rewards for changing behavior. Perversely, this negotiation strategy merely encourages countries to become rogue states for the very purpose of obtaining these rewards.

Our trade representative publishes annual reports on the unlawful trade practices of various countries. This year, USTR has particularly harsh assessments of the trade practices of China, Paraguay, and Ukraine. China has been singled out in previous years for unlawful trade practices, particularly related to the absence of intellectual property protection. Although China is one of our major trading partners, we have not used the offices of the WTO to litigate our complaints, except in the narrow instance of value-added taxes on integrated circuit boards. Instead, we have the USTR prepare reports that publicly decry the trade practices of China while simultaneously praising them. The problems with their trade practices have not diminished.

Diplomacy may not permit inflexible stances toward petty tyrants armed with nuclear weapons. But if we can find it proper to take our closest allies to court and litigate the most detailed and arcane of issues, surely we can take harder stances against those who have yet to become our closest friends.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.