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Book part
Publication date: 1 February 2009

Bryan Mercurio

The appropriateness of retaliatory trade measures in the World Trade Organization dispute settlement process have increasingly come under scrutiny in recent years. Several…

Abstract

The appropriateness of retaliatory trade measures in the World Trade Organization dispute settlement process have increasingly come under scrutiny in recent years. Several Members and commentators alike have recommended large-scale amendments to the Dispute Settlement Understanding (DSU) to provide alternatives to retaliatory measures, with the most notable including compensation, collective retaliation, and increased special and differential treatment for developing countries and/or widespread loss of privileges for non-conforming respondents.

Unfortunately, many of the proposals failed to first identify the aims and objectives of the retaliatory phase, or even of dispute settlement more generally. This chapter takes a more holistic approach in its analysis of whether any of the current proposals will improve (or harm) the system. In doing so, this chapter will first assess the effectiveness and appropriateness of retaliatory trade measures by evaluating the goals and objectives in which it is designed to achieve. It will then evaluate some of the more prominent proposals for amending the DSU under the same framework. Taking such an approach will allow for a more comprehensive review and will reveal not only the problems with retaliatory trade measures, but also its positive aspects, and not only the positive aspects of the suggested alternatives but also where they may be detrimental to the system.

Details

Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment
Type: Book
ISBN: 978-1-84855-206-7

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Book part
Publication date: 1 February 2009

Joseph Pelzman and Amir Shoham

The WTO dispute settlement process is an improvement to the original GATT dispute settlement mechanism. However, it fails to assure a timely implementation and enforcement…

Abstract

The WTO dispute settlement process is an improvement to the original GATT dispute settlement mechanism. However, it fails to assure a timely implementation and enforcement of the dispute settlement body (DSB) recommendations. To this date, the issue of mandatory enforcement is still open to interpretation. The number of ‘matters’ that have been subject to WTO dispute settlement stands at 266 over the 1995–2006 period. The number of implementation disputes has increased since 1998 and stand at 34 as of January 1, 2007. This chapter reviews the process of dispute settlements and enforcements since 1995 and to argue for the interpretation of ‘WTO agreements’ as ‘binding contracts’ whose breach must be evaluated as either ‘efficient’ or ‘non-efficient’ when discussing enforcement. In this context the non-compliance issue may be viewed as an ‘efficient breach’ where the only efficient remedy is a ‘fine’ rather than the usual practice of ‘suspension of concessions or other obligations’ to the Respondent. What sets our approach apart from earlier discussion is that it does not view ‘suspension of concessions’ as a sufficiently burdensome and efficient sanction. A ‘fine’ on the other hand may serve as a ‘buy out’ of a Respondents WTO obligations, and can be transferred to the negatively affected domestic producers in the Complainant's market as compensation for losses.

Details

Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment
Type: Book
ISBN: 978-1-84855-206-7

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Article
Publication date: 23 March 2012

Claus D. Zimmermann

The purpose of this paper is to show that, instead of replacing trade retaliation with alternatives that are equally problematic, such as monetary damages, mandatory trade…

Abstract

Purpose

The purpose of this paper is to show that, instead of replacing trade retaliation with alternatives that are equally problematic, such as monetary damages, mandatory trade compensation, or formal membership sanctions, the World Trade Organization (WTO) might gain from relying exclusively on informal remedies.

Design/methodology/approach

The paper critically reviews the main proposals brought forward in the literature and by WTO members on how to reform WTO remedies. It takes a fresh look at whether any viable, both economically and legally sensitive, alternatives exist.

Findings

First, the fact that WTO dispute settlement does not rely on monetary damages and on reparation for past losses is economically justified. Second, switching to an alternative remedy of mandatory trade compensation is not a viable alternative to proportional countermeasures. Third, introducing formal membership sanctions into the WTO would either remain ineffective or turn out to be counterproductive for progressive trade liberalization. Fourth, in order not to provoke an excessive increase of the total cost for WTO members to breach their obligations, any strengthening of the WTO's informal remedies should not be undertaken on top of existing remedies, but as part of a major paradigm shift built on the abrogation of trade retaliation.

Practical implications

The article contributes to the ongoing debate on how to reform the WTO's dispute settlement mechanism.

Originality/value

This article joins an already vast body of literature dealing with potential reforms of the WTO's dispute settlement mechanism. It provides a holistic review of the main existing reform proposals under both legal and economic aspects and adds original insights in discussing the replacement of trade remedies by strengthened informal remedies.

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Book part
Publication date: 1 February 2009

James C. Hartigan

Beginning with the assumption that antidumping laws are used to address adverse shocks in import-competing industries, this chapter provides an explanation for the…

Abstract

Beginning with the assumption that antidumping laws are used to address adverse shocks in import-competing industries, this chapter provides an explanation for the infrequent utilization of the Dispute Settlement Understanding under the Antidumping Agreement. It does so with a very simple model that represents the shock by a one-dimensional random variable. This is found on an interpretation of the ADA as a de facto escape clause. ADA signatories are homogeneous, which enables the representation of the expected frequency of shocks over each member's import-competing sectors by the binomial distribution with identical parameters. The explanation for the infrequency of utilization of the DSU invokes a repeated Prisoners’ Dilemma with two levels of cooperation in an infinite horizon game. The high level is free trade in all sectors. The low level is the application of ADA duties in sectors incurring the shock in a manner that is consistent with the ADA. The high level of cooperation in all sectors in every period is not sustainable for any degree of patience. A convex combination of the high and low levels of cooperation is sustainable for some degrees of patience under the folk theorem. However, this combination of cooperation is attainable only with the support of the DSU. The extent of importance of the DSU depends on the completeness of information with which signatories are endowed. With complete information, dispute resolution does not occur in equilibrium. However, its presence supports cooperation through its mandate to sanction retaliation. If filing were prohibitively costly, disputes would never arise, and cooperation would be expected to evaporate. In the instance of incomplete information with costless filing, disputes would occur in equilibrium whenever an AD action was taken. In the most realistic circumstance, that of incomplete information and nonprohibitive filing costs, disputes would arise only when the number of AD actions exceeded their (common) expectation. This provides a conceptual explanation for the observations of Tarullo (2002) and Bown (2005) that ADA disputes are infrequent.

Details

Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment
Type: Book
ISBN: 978-1-84855-206-7

Keywords

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Book part
Publication date: 1 February 2009

Leslie Johns and B. Peter Rosendorff

Many functionalist models of international cooperation rely on punishment by states to enforce cooperation. However, the empirical record suggests that such state-based…

Abstract

Many functionalist models of international cooperation rely on punishment by states to enforce cooperation. However, the empirical record suggests that such state-based accounts offer an incomplete explanation of international trade cooperation. We argue that when theoretical approaches are adjusted to incorporate aspects of domestic politics and institutions, two key insights emerge. First, political pressure from domestic industries can be key in creating demand for violations of trade agreements. Since such pressure is affected by stochastic shocks, the temptation of leaders to commit trade violations can vary over time. The presence of a dispute settlement procedure (DSP) provides flexibility that allows leaders to respond to such pressure by occasionally committing violations and then compensating their trading partners, if the DSP finds that the violation was not subject to exceptions in the trading agreement. This flexibility enhances the willingness of leaders to sign cooperative agreements in the first place. Second, domestic politics can function as an enforcement mechanism for ensuring compliance with international trade agreements and DSP rulings. Voters can condition their electoral decisions on whether their leader complies with socially beneficial trade agreements. The DSP plays an important role in this account as an information-provider. For voters to hold their leaders accountable, they need information about what choices their leader has made and whether his actions constitute compliance with an international agreement. The DSP provides transparency and reduces uncertainty about these factors.

Details

Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment
Type: Book
ISBN: 978-1-84855-206-7

Keywords

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Book part
Publication date: 1 February 2009

Indranil Chakraborty and James C. Hartigan

Among the primary suggestions for reform of the Dispute Settlement Understanding (DSU) of the WTO has been remedies for noncompliance. Prior literature has considered…

Abstract

Among the primary suggestions for reform of the Dispute Settlement Understanding (DSU) of the WTO has been remedies for noncompliance. Prior literature has considered remedies in the context of deliberate breach of commitments. The WTO increasingly has, however, been negotiating commitments in subjective areas of policy. Thus, we provide a model of the DSU under which members' interpretations of concessions differ. This induces disputes regarding violation of commitments.

The Dispute Settlement Body (DSB) has promoted compliance primarily through authorization of retaliation (prospective punishment) after expiration of a reasonable period of time for the implementation of a verdict. As has been noted, this does not compensate a complainant for a violation of obligations and enables the respondent to circumvent punishment for imposing a cost upon a member of the WTO by reforming its offending policy reasonably promptly. We consider retrospective penalties (compensation for a loss) with and without reinforcement by retaliation as alternative enforcement mechanisms and find that a simple retaliatory punishment scheme is preferable. A penalty is unenforceable, as a member that is unwilling to reform its policy after an adverse judgment can decline to provide compensation. A penalty reinforced by retaliation can reduce compliance relative to a simple prospective punishment by raising the cost of abiding by the judgement.

Remedies also affect the negotiation of commitments. Members are more willing to make and less willing to accept unenforceable commitments. In this regard, the simple prospective punishment scheme is preferable.

Details

Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment
Type: Book
ISBN: 978-1-84855-206-7

Keywords

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Article
Publication date: 29 March 2011

J. Pfumorodze

The purpose of this paper is to analyse World Trade Organisation (WTO) remedies from a developing country perspective, with a view to suggest reforms in the system.

Abstract

Purpose

The purpose of this paper is to analyse World Trade Organisation (WTO) remedies from a developing country perspective, with a view to suggest reforms in the system.

Design/methodology/approach

WTO members' proposals for reforming WTO remedies and WTO cases are reviewed in order to determine the need for reforms and the nature of reforms to be undertaken.

Findings

WTO remedies are unfavourable to developing countries, most of which are unable to utilise them due to their weaker economies as compared to their developed country counterparts. There is no consensus on the nature of reforms to be undertaken. This paper suggests the need to synthesise the current proposals and develop various workable models.

Originality/value

This paper provides proposals which may improve WTO remedies for the benefit of developing countries, thereby not only strengthening the WTO enforcement mechanism but the multilateral trading system as a whole.

Details

Journal of International Trade Law and Policy, vol. 10 no. 1
Type: Research Article
ISSN: 1477-0024

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Article
Publication date: 21 June 2011

Elimma C. Ezeani

The purpose of this paper is to examine the critical issue of legal interpretation on the “development question” as they arise before WTO panels and Appellate Body, in…

Abstract

Purpose

The purpose of this paper is to examine the critical issue of legal interpretation on the “development question” as they arise before WTO panels and Appellate Body, in view of the benefits inherent in a more‐rounded consideration of the development needs and concerns of WTO developing country Member States.

Design/methodology/approach

The introduction sets out the background to the challenges of developing countries in utilising the dispute settlement process effectively and using existing support. By analysing relevant cases, Section 2 analyses the “development question” and how it has been so far considered in legal interpretation. Section 3 addresses WTO jurisprudence on development, examining situations wherein “development” arises in the course of WTO dispute settlement. An examination as to how this aspect of WTO jurisprudence may be revisited including the potential aid of trade policy review mechanisms, and procedures for enforcement is then undertaken. It concludes on the position that the WTO judicial review process can work better by providing the much‐needed balance between binding global trade rules and the domestic progress of its developing country membership at the level of dispute settlement.

Findings

This paper establishes the importance of recognising and addressing the fact that core challenges and concerns facing developing countries can and should be factored into the legal interpretation of issues in dispute settlement.

Originality/value

A decisive enquiry into WTO development jurisprudence, this paper addresses developing country capacity to pursue the legal opportunities promised by the WTO dispute settlement mechanism, and how this can be redressed.

Details

Journal of International Trade Law and Policy, vol. 10 no. 2
Type: Research Article
ISSN: 1477-0024

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Article
Publication date: 13 September 2011

Mervyn Martin and Maryam Shademan Pajouh

The purpose of the paper is to highlight the lack of fairness in the international trading system, including the HR policies in the WTO which have wider implications on…

Abstract

Purpose

The purpose of the paper is to highlight the lack of fairness in the international trading system, including the HR policies in the WTO which have wider implications on the participation of developing countries in the multilateral trading system.

Design/methodology/approach

The main research methodology undertaken for this paper is based on the quantitative approach, predominantly from sources such as books, articles and WTO reports.

Findings

There is a correlation between the HR policies employed by the WTO and the usage by developing countries of the WTO DSU.

Practical implications

The implications of the research/paper indicate that discrimination against developing countries in the international system goes beyond their inherent weakness as poorer members of the international order. Such discrimination is deep rooted within the institutional governance of the system.

Social implications

The need to re‐evaluate policies practices by international institutions in the light of the developments of the twenty‐first century.

Originality/value

There has been no work undertaken in relation to the use of language as a criterion for job selection and its implications on the participatory value of developing countries in the WTO DSU.

Details

Journal of International Trade Law and Policy, vol. 10 no. 3
Type: Research Article
ISSN: 1477-0024

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Article
Publication date: 25 January 2019

Amrita Bahri and Toufiq Ali

World Trade Organisation grants rights to its members, and WTO Dispute Settlement Understanding (DSU) provides a rule-oriented consultative and judicial mechanism to…

Abstract

Purpose

World Trade Organisation grants rights to its members, and WTO Dispute Settlement Understanding (DSU) provides a rule-oriented consultative and judicial mechanism to protect these rights in cases of WTO-incompatible trade infringements. However, the DSU participation benefits come at a cost. These costs are acutely formidable for least developing countries (LDCs) which have small market size and trading stakes. No LDC has ever filed a WTO compliant, with the only exception of India-Battery dispute filed by Bangladesh against India. This paper aims to look at the experience of how Bangladesh – so far the only LDC member that has filed a formal WTO complaint – persuaded India to withdraw anti-dumping duties India had imposed on the import of acid battery from Bangladesh.

Design/methodology/approach

The investigation is grounded on practically informed findings gathered through authors’ work experience and several semi-structured interviews and discussions which the authors have conducted with government representatives from Bangladesh, government and industry representatives from other developing countries, trade lawyers and officials based in Geneva and Brussels, and civil society organisations.

Findings

The discussion provides a sound indication of the participation impediments that LDCs can face at WTO DSU and the ways in which such challenges can be overcome with the help of resources available at the domestic level. It also exemplifies how domestic laws and practices can respond to international legal instruments and impact the performance of an LDC at an international adjudicatory forum.

Originality/value

Except one book chapter and a working paper, there is no literature available on this matter. This investigation is grounded on practically informed findings gathered with the help of original empirical research conducted by the authors.

Details

Journal of International Trade Law and Policy, vol. 18 no. 1
Type: Research Article
ISSN: 1477-0024

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